Battery Eggs Sale
and Production
in the ACT
October 1998
Research Report
 Commonwealth of Australia 1998
ISBN
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An appropriate citation for this paper is:
Productivity Commission 1998, Battery Eggs Sale and Production in the ACT,
Research Report, AusInfo, Canberra.
The Productivity Commission
The Productivity Commission was established in April 1998 as the Government’s principal
microeconomic research and advisory body. It undertakes analysis of a broad range of social and
economic issues affecting Australia as a whole. For example, it has recently reported into private
charities, public housing, government assistance to industry, health insurance and ecologically
sustainable land management.
The Commission provides independent analysis and advice, using processes that are open and
public and driven by concern for the well-being of the community as a whole.
Information on the Productivity Commission and its current work program can be found on the
World Wide Web at http://www.pc.gov.au or by contacting Media and Publications.
Foreword
This report has been prepared for the ACT Government. It follows a request to the
Commonwealth Treasurer that the Commission undertake public benefit tests on
ACT legislation banning the production and sale of battery eggs and requiring
specific labelling of eggs. These tests are required under the Competition Principles
Agreement for any legislation that restricts competition.
Public benefit tests require an assessment of all the costs and benefits of a
regulation. In the case of battery hen regulation in the ACT, the costs largely stem
from higher egg prices for ACT consumers and the costs of adjustment in
production, both of which can be quantified. The benefits are much more complex,
however, as they relate to expected changes in hen welfare and the effect of such
changes on the wider community.
This report investigates these matters in detail, drawing on a wide literature and
extensive public consultations, and provides a framework for assessing whether the
benefits exceed the costs. It does not, however, attempt an overall judgment on this
matter, given the inherent subjectivity and ethical considerations in some elements
of the benefit calculation. These will ultimately require an exercise of judgment by
the ACT community’s elected representatives.
The Commission would like to thank all of those organisations and individuals who
contributed to the study.
Gary Banks
Chairman
October 1998
FOREWORD
III
IV
FOREWORD
Contents
Foreword
III
Main abbreviations
X
Summary
XI
1
Introduction
1.1 Background to the debate
1.2 Why is a public benefit test needed?
1.3 What is a public benefit test?
1.4 What is the scope of the public benefit test?
1.5 Consultative processes
1.6 Structure of the report
1
1
4
5
5
7
7
2
A framework for analysis
2.1 Introduction
2.2 Key issues
9
9
11
3
Effectiveness of the ACT legislation
3.1 Section 69 challenge
3.2 Differential labelling provisions
3.3 Purchase of eggs from interstate
3.4 Eggs imported from other countries
3.5 Substitution effects
3.6 Enforcement
3.7 Summary
15
15
16
17
18
18
18
19
4
Animal welfare issues
4.1 What is meant by animal welfare?
4.2 The hen
4.3 What is the life cycle of hens in intensive farming systems?
4.4 Egg production systems: the battery cage and its alternatives
21
21
27
28
29
CONTENTS
V
4.5
4.6
4.7
4.8
Current approaches to hen welfare
Impacts on welfare of the different systems
Non-scientific aspects of animal welfare
Conclusion
33
36
48
50
5
Impacts on producers and jobs
5.1 Industry structure
5.2 Costs of egg production
5.3 Impact of the ban on producers
5.4 Employment impacts
5.5 Concluding comments
53
53
60
65
69
70
6
Impacts on the ACT community
6.1 Introduction
6.2 The ACT market
6.3 What are retail prices now and what will happen to them?
6.4 Impact of the ban on the demand for eggs
6.5 What are the welfare impacts of the ban on ACT consumers?
6.6 Limitations of consumers’ apparently revealed preferences when
measuring costs
6.7 Stepping outside individual consumer preferences
73
73
74
76
79
80
87
95
7
Other issues
7.1 Introduction
7.2 Human health
7.3 Environmental matters
7.4 Occupational Health and Safety
7.5 Administration, enforcement and compliance costs
7.6 Summing up
99
99
99
102
102
103
105
8
Policy options
8.1 Introduction
8.2 Alternative policy options
8.3 Weighing up the ACT proposals
8.4 Summing up
107
107
107
113
115
VI
BATTERY EGGS
Appendices
A
Ministerial correspondence
Terms of Reference
119
123
B
Public participation
125
C
What other countries do
131
D
Costs to consumers
D.1 Framework
D.2 Production costs
D.3 Retail prices
D.4 Market shares
D.5 Egg consumption in the ACT
D.6 Costs to consumers — direct consumption of eggs
D.7 Costs to consumers — indirect consumption of eggs
D.8 Retailers’ and wholesalers’ margins
D.9 Total costs to consumers and intermediate users
135
135
136
139
139
141
142
143
143
144
E
Retail prices in the ACT
147
F
The expected lifespan of hens
149
References
Boxes
1.1
4.1
4.2
4.3
4.4
4.5
4.6
4.7
6.1
6.2
151
Relevant ACT legislation relating to eggs from battery caged hens
The battery cage system
An Australian barn-lay system
The Senate Select Committee’s animal welfare ‘freedoms’
ANZFAS approach to evaluating animal welfare
The Brambell floor
Extracts from submissions supporting the ACT ban
What the scientists say about the battery system
A UK survey of consumer valuation of hen welfare
AGB McNair survey of attitudes to hen welfare
CONTENTS
3
30
32
34
34
44
45
47
93
94
VII
Figures
1.1
Interactions between relevant legislation
2.1
Framework for assessing the costs versus benefits
4.1
Framework for evaluating animal welfare
5.1
Egg output prices and main input price indicators, 1987–88 to
1997–98
5.2
Volume and value of commercial egg production, Australia, 1983–84
to 1996–97
6.1
Eggs directly and indirectly consumed in the ACT
6.2
Projected direct costs for households for ten years after the ban
6.3
Overall ratings given to different housing systems
D.1 Costs for consumers from the ban
D.2 Projected farm production costs, barn-lay and battery cages
Tables
4.1
Aspects of animal welfare
4.2
Mortality rates in hens in different housing systems
4.3
Expected life of hens with different annual mortality rates
4.4
Aspects of animal welfare in battery cage and barn-lay systems
5.1
Number of farms and egg producing birds, March 1996
5.2
Relative cost of inputs for egg production in battery cage systems
5.3
One producer’s relative costs per egg for different production
systems
5.4
Production costs in different egg production systems
5.5
Egg production costs in different systems: SVC results
6.1
Estimated egg consumption in the ACT, 1987–88 to 1998–99
6.2
Disposal of egg industry output by value, Australia
6.3
Market share of eggs by production system, ACT, 1998
6.4
Indication of prices by egg type by points in the distribution chain,
ACT, September 1998
6.5
Price elasticity estimates for commercially produced shell eggs
6.6
Summary of costs for the ACT community of the ban
6.7
Expenditure on eggs by income quintile, Canberra, 1993–94
6.8
Impacts of the ban by income quintile, 1993–94 prices
6.9
Net income effect of the ban as a share of income by household type
and income quintile, 1993–94
VIII
BATTERY EGGS
6
12
23
56
59
76
82
89
136
138
27
37
38
39
58
61
62
63
64
74
75
77
78
80
83
85
86
87
B.1
B.2
D.1
D.2
E.1
E.2
Submissions received
Visits and discussions
Costs to consumers (standard parameter settings)
Costs to consumers (under alternative assumptions)
Regression model of ACT egg prices per kilogram
Prices for 59 gram eggs in the ACT sold in supermarkets
CONTENTS
126
129
145
146
148
148
IX
Main abbreviations
ABARE
Australian Bureau of Agricultural and Resource Economics
ABS
Australian Bureau of Statistics
ACT
Australian Capital Territory
AEIA
Australian Egg Industry Association
ANZFS
Australian & New Zealand Federation of Animal Societies
CPA
Competition Principles Agreement
DPIT
Department of Primary Industry (Tasmania)
EU
European Union
IC
Industry Commission
NFA
NSW Farmers’ Association
NRAAVC
National Registration Authority for Agricultural and
Veterinary Chemicals
MRA
Mutual Recognition Act
ORR
Office of Regulation Review
R&D
Research & Development
RSPCA
Royal Society for the Prevention of Cruelty to Animals
SVC
(EU) Scientific Veterinary Committee
TTMRA
Trans-Tasman Mutual Recognition Arrangement
UK
United Kingdom
X
BATTERY EGGS
Summary
In September 1997, the ACT Legislative Assembly passed legislation to:
•
ban the production and sale in the ACT of eggs produced by hens housed in
battery cages; and
•
require the labelling of egg cartons sold in the ACT to indicate the production
system used to produce the eggs.
One effect of the legislation would be to restrict competition in the supply of eggs to
the ACT. This triggers the Competition Principles Agreement, which requires
governments to undertake public benefit tests of legislation which restricts
competition, to assess whether the community benefits associated with the
restrictions outweigh the costs.
This study follows the Treasurer’s agreement to an ACT Government request that
the Commission carry out these public benefit tests on its behalf.
The framework for undertaking public benefit tests requires that all relevant factors
— not just economic benefits and costs — be taken into account. This is important
because the proposed ACT ban on battery eggs involves consideration of ethical
issues associated with the welfare of layer hens.
Hen welfare
Governments throughout Australia (and elsewhere) commonly use legislation to
prescribe minimum standards of animal care. Such legislation is often generic in
character. However, animal welfare concerns arising in particular industries are
often addressed in codes of practice developed jointly by government and the
industry.
Animal-specific legislation to ban particular animal housing or husbandry practices
is less common. In the context of layer hens, a number of European countries have
recently contemplated, or are presently considering, banning the use of battery cage
systems. One country — Switzerland — has already effectively banned battery egg
production.
SUMMARY
XI
Assessing the animal welfare effects of different egg production systems is far more
difficult than is popularly conceived. For instance, all commercial systems — not
just battery cage systems — have some adverse welfare effects (eg beak trimming is
common to all systems, as is the practice of disposing of birds at around 72 weeks
of age). A number of other factors add to the complexity of the task, leading to very
different views about the overall effect on hen welfare of the three major egg
production systems (battery cage, barn-lay and free-range).
It is clear that different egg production systems have a variety of subtle and complex
influences on the physical and behavioural aspects of hen welfare. It is also evident
that one key determinant of animal welfare is not related to the housing system at
all, but to the standards of animal husbandry practised by farm managers. Some of
the major advantages and disadvantages for hen welfare of the battery cage system
and its main commercial alternative — the barn-lay system — are shown in the box
below.
Animal welfare: battery cage and barn-lay systems
Main advantages
Battery cage
Barn-lay
• Relatively low mortality
• Cannibalism and sickness is
Main disadvantages
• Space restrictions prevent
relatively low
• Better environment in terms of
temperature control and low dust
levels
expression of natural behaviours
such as dust bathing, perching,
nesting, wing stretching and
exercising
• Feather pecking and fracture rates
are relatively high
• Space and facilities to allow
• Mortality is higher than in cages,
exercise and natural behaviours
that are not possible in cages
in part reflecting higher levels of
cannibalism and disease
• Higher skill level needed for good
husbandry
In assessing hen welfare, the Commission has drawn on international and Australian
studies and on information provided by participants in this study. This evidence
suggests that, on balance, a move away from the use of battery cage systems would
lead to some improvement in hen welfare, particularly in the longer term (chapter
4). This mainly reflects the fact that alternative systems allow greater expression of
behaviours which experts in the field agree are important to hens — such as dust
bathing, nesting and perching.
XII
BATTERY EGGS
Economic costs
The economic costs of the ban would largely be reflected in higher egg prices faced
by households that presently buy battery eggs. Consumers of goods produced in the
ACT that use fresh shell eggs (such as restaurants and fast food outlets) would also
experience small price increases.
The annual costs to consumers of these increases is estimated to peak at about
$900 000 in the year after the ban, and then fall steadily in subsequent years.
Initially, this implies an increase in retail egg prices of around $0.40 per dozen. The
annual savings (the perpetuity) needed to pay for these price increases is estimated
to be around $650 000 (commencing in 2005–06 — the likely year when the ban
would be implemented) (chapter 6). This estimate reflects a number of assumptions
including:
•
an increase in the supply of eggs produced in barn-lay systems, but not
necessarily in systems identical to those that presently meet RSPCA standards;
•
a fall in the price differential between battery eggs and other eggs;
•
a decrease in the retail margin on barn-lay eggs as they become the predominant
type of egg consumed in the ACT after the ban comes into effect;
•
the maintenance of the current trend in consumer preferences towards nonbattery eggs; and
•
a continuation of the present fall in per capita egg consumption.
Other significant costs are one-off adjustment costs experienced by producers
(including the premature retirement of productive assets) and employees. These
costs depend largely on:
•
the present value of the assets specific to battery egg production of Barrter
Parkwood — the predominant producer in the ACT;
•
whether or not these assets could be used elsewhere; and
•
the extent, if any, of future activity at the Parkwood site.
Based on Barrter’s statement that it would cease business in the ACT and
independent asset valuations provided by the company, the adjustment costs are
estimated to be no more than $4.4 million. The annual perpetuity needed to meet
this cost is around $290 000 (chapter 5).
To the extent that there is surplus capacity in the industry, the early retirement of
Parkwood’s assets could lead to the use of otherwise unused (or under-utilised)
SUMMARY
XIII
capacity elsewhere in the industry. In this circumstance, the adjustment costs —
from the community’s viewpoint — would be less.
Implementation of the ban and the labelling requirement would increase ACT
Government administration and enforcement costs (chapter 7). Some would be ‘oneoff’ establishment costs (eg creating the prescribed expressions for egg cartons).
Some costs will be on-going (eg measures to limit the scope for battery eggs to be
misrepresented as barn-lay or free-range eggs). However, administration and
enforcement costs would be small relative to the consumer and adjustment costs.
Commercial egg production can give rise to adverse environmental, consumer health
and occupational health and safety outcomes. However, poor performance in these
areas has seldom been a serious problem in the past. The Commission does not
consider that the ACT legislative amendments would have any significant effect on
the likelihood of these problems occurring in the future.
Overall, the major economic costs are those that would be experienced by
consumers and adjustment costs. These are estimated to be equivalent to an annual
perpetuity of no more than $940 000.
Weighing up the benefits and costs
The major benefits accruing to the community from the ban are related to the
improvement in hen welfare and the lower egg prices that would, in time, be
enjoyed by current ACT consumers of barn-lay eggs.
While the available information suggests that, on balance, the ban would make some
improvement to hen welfare, the Commission cannot reliably assess in quantitative
terms the extent of the associated community benefits. If the benefits are to
outweigh the costs, they would need to exceed the cost associated with an annual
perpetuity of around $940 000. The Government of the ACT — the residents of
which will bear most of the costs stemming from the ban — will have to judge
whether the benefits outweigh these costs.
The requirement to label egg cartons to clearly indicate the manner in which the
eggs have been produced is more straight-forward. The provision of this additional
information could benefit a significant proportion of consumers with little or no
addition to producers’ costs. The benefits would be larger if the ACT Government
were able to obtain an exemption from the Mutual Recognition Act to make it
compulsory for interstate producers to label eggs they sell in the ACT.
XIV
BATTERY EGGS
Alternative action
The Commission examined a number of alternative policy options. None of the
alternatives would be likely to achieve the intended objectives of the proposed ban
in a cost-effective manner. However, the implementation of the ban will require the
unanimous agreement of Heads of Government to an exemption to the Mutual
Recognition Act. If this is judged unlikely, the ACT Government should consider
the option of improving hen welfare by seeking to better inform ACT consumers
about the animal welfare effects of different egg production systems.
As some battery eggs would still be sold in the ACT, this option would reduce the
number of hens kept in battery cages (and the accompanying benefits) by a smaller
amount than would a ban. However, it would avoid the costs associated with a ban
(eg an increase in retail egg prices and the premature retirement of some Parkwood
assets). Implementation may also be easier (even though an exemption to the Mutual
Recognition Act would still be needed to make this option fully effective) (chapter
8).
SUMMARY
XV
Key findings
1. The ACT legislative amendments would lead to some improvement in layer hen
welfare, particularly in the longer term. The extent of the improvement, and the
benefits that would be derived by the ACT community and other Australians, are
not amenable to reliable measurement. This, in part, reflects the fact that the
proposed ban on battery eggs raises ethical, as well as economic issues.
2. The implementation of a ban on the production and sale of battery hen eggs in
the ACT would give rise to two significant economic costs:
•
costs borne by consumers because of higher egg prices are estimated to be the
equivalent of an annual perpetuity of about $650 000; and
•
adjustment costs resulting from the premature retirement of productive assets are
estimated to be the equivalent of an annual perpetuity of no more than $290 000.
There would also be a minor increase in ACT Government administration and
enforcement costs.
3. The ban on battery hen eggs could result in the closure of the major egg producer
in the ACT and an increase in egg production in New South Wales. This would be
reflected in higher employment in the New South Wales egg industry and a fall in
the ACT. Overall, there could be a small increase in aggregate employment in the
industry because of the higher labour intensity of alternative egg production systems
compared with battery cage systems.
4. Any consumer health, environmental or occupational health and safety effects
stemming from the ban would be negligible.
5. As most of the costs are borne by the ACT, it is appropriate for the ACT
Government to judge whether the community benefits from banning the production
and sale of battery eggs outweigh the costs. The benefits associated with the
restriction to competition resulting from the legislative amendment could be viewed
as outweighing the costs if they are assessed to exceed the cost of an annual
perpetuity of approximately $940 000.
6. Many consumers have a poor understanding of the animal welfare implications
of the different egg production systems. Labelling of egg cartons to indicate the
manner in which the eggs have been produced would benefit some of these
consumers. The extent of this benefit cannot be quantified. However, the associated
costs are likely to be negligible. The Commission considers that the benefits of the
legislative amendments relating to labelling outweigh the costs.
XVI
BATTERY EGGS
The Commission draws attention to its comments on the desirability of the ACT
Government:
•
pursuing its layer hen welfare objectives by providing consumers with
information about the effects of different egg production systems on hen welfare
if the granting of an exemption to the Commonwealth’s Mutual Recognition Act
1992 for the ban is considered problematic, or if the community benefits of a ban
are perceived to be insufficient to outweigh the estimated costs (chapter 8);
•
if a ban is introduced, considering complementary measures — such as
reviewing codes of practice and coordinating relevant research — to maximise
the potential for improvements in hen welfare stemming from the ban
(chapter 4); and
•
seeking to have Section 24A (1) of the Food Amendment Act 1997 added to the
permanent exemptions listed at Schedule 2 of the Commonwealth’s Mutual
Recognition Act 1992.
SUMMARY
XVII
1
Introduction
This report has been prepared for the ACT Government. It follows the
Commonwealth Treasurer’s approval of a request by the ACT Government for the
Commission to undertake public benefit tests of legislation relating to the
production and sale of battery eggs in the ACT. In keeping with the functions set
out in its Act, the Commission’s role is limited to that of an advisory body —
decisions about future action are the prerogative of government. Ministerial
correspondence and the terms of reference are provided in appendix A.
The report examines the costs and benefits of:
•
a ban on the sale and production of eggs from battery caged hens in the ACT;
and
•
a requirement that egg cartons be labelled to indicate how the eggs were
produced.
The study takes account of the impacts of the legislative amendments on animal
welfare, as well as on consumers and producers. It also addresses the question of
whether a ban is the most appropriate regulatory response, and what substitute and
complementary measures might be appropriate to meet the objectives of the ACT
legislation.
This chapter looks at the background to the study and the nature of the proposed
legislation. It also outlines the consultative processes used in the study and the
report structure.
1.1
Background to the debate
In Australia, three major systems are used in commercial production of eggs:
•
the battery cage system (birds are housed in small wire cages, typically with
several other birds);
•
the barn-lay system (birds are housed in barns, which have provision for nesting
boxes and perches); and
•
the free-range system (birds have access to open air and sunlight, as well as
shelter with nesting boxes and perches).
INTRODUCTION
1
There is debate about how these different systems affect animal welfare, including
over what constitutes an admissible indicator of animal welfare. Some evidence
points to adverse outcomes for hens housed in battery cages. This mainly reflects
the restriction on movement and the inability of birds to perform some normal
behaviours, such as dust-bathing and nesting (see chapter 4). Both nationally and
internationally, concern about the welfare of battery caged hens has led to calls by
animal welfare groups for greater consumer awareness about the conditions of
battery caged hens, stricter codes to alleviate perceived cruelty to layer hens and, in
some cases, the abolition of the intensive battery cage system.
On the other hand, not all aspects of hen welfare are improved in alternative
systems. For instance, mortality rates tend to be higher and egg production — seen
by some as an indicator of animal welfare — tends to be lower in non-cage systems.
Importantly, some animal welfare concerns are common to all of the three main
types of egg production systems currently in use in Australia — for example, culling
of males in hatcheries, beak trimming, shortened bird lives and large flock sizes.
While some changes in husbandry practices can improve both animal welfare and
reduce production costs and prices to consumers, there is often a trade-off between
animal welfare and costs. Diverging attitudes about the nature and appropriate size
of the trade-off have influenced the policy viewpoints of different interest groups.
Around the world, many jurisdictions have entertained controls on battery hens.
However, governments have been concerned that, in the absence of import
restrictions, prohibition of battery cage egg production would merely shift supply to
those jurisdictions which continued to permit cheaper battery cage production. In
many instances, import restrictions are either not feasible (because such powers do
not reside with lower levels of government) or, at the national level, conflict with
trade agreements or risk retaliation by trading partners. The only effective ban exists
in Switzerland (appendix C).
On 19 September 1997, the ACT Legislative Assembly passed the Animal Welfare
(Amendment) Act 1997 and the Food (Amendment) Act 1997 — see box 1.1. The
legislation is intended to:
•
prohibit the sale of eggs from battery caged hens in the ACT (whether produced
in the ACT or imported from other jurisdictions);
•
prohibit the production of eggs from battery caged hens in the ACT; and
•
introduce a labelling requirement that all eggs originating in the ACT indicate
the conditions under which the hens produced the eggs (for example, by barnlay, free-range or other production methods).
2
BATTERY EGGS
The ban on the sale of battery eggs does not apply to semi-processed egg products
(eg egg powder) or to products incorporating battery eggs (eg pastry and biscuits)
‘imported’ from other states.
Box 1.1
Relevant ACT legislation relating to eggs from battery caged
hens
1. Abolition of the sale and production of eggs from battery caged hens
Subsection 24A(1) of the Food (Amendment) Act 1997 states ‘A person shall not sell
eggs produced by a hen kept in a manner that constitutes an offence against a law of
the Territory or that would constitute such an offence if the hen were so kept in the
Territory’. Section 9A of the Animal Welfare (Amendment) Act 1997 states ‘A person
shall not keep hens for the purpose of egg production in a battery cage system’. A
definition of ‘battery cage system’ is provided in the Code of Practice for the Welfare
of Animals: Domestic Poultry.
Subsection 24A(2) of the above act exempts a product where eggs are an ingredient
in the product sold.
To give egg producers time to adjust to these changes, the Animal Welfare
(Amendment) Act 1997 also stipulates that the prohibition on the production of eggs
using a battery cage system only comes into force six years after the date on which
Section 24A(1) of the Food (Amendment) Act 1997 is added to the Permanent
Exemptions listed at Schedule 2 of the Commonwealth’s Mutual Recognition Act
1992 .
2. Labelling
Subsection 24B of the Food (Amendment) Act 1997 requires that all egg cartons
displayed or sold in the ACT be labelled in such a way that users will be aware of the
general conditions under which the hens produced the eggs.
The ACT Government recently deferred the implementation of the new provision for a
period of up to 12 months. This followed the refusal of the Australia and New Zealand
Food Standards Council to agree to an ACT proposal for the adoption of a national
standard of egg packaging. The Government is currently preparing the labelling
expressions in consultation with relevant stakeholders.
Source: ACT Government.
INTRODUCTION
3
1.2
Why is a public benefit test needed?
The ACT is bound by the Mutual Recognition (Commonwealth) Act 1992 (MRA)1
and is a signatory to the Competition Principles Agreement (CPA).
Under the MRA, a good that may legally be sold in one state or territory may be
sold in any other, despite different requirements applying in the second jurisdiction.
Such differences may apply to packaging, labelling, testing or restrictions on the
product itself.
On its own, the MRA means that a ban on the sale of eggs from battery caged hens
in the ACT would only affect the sale of eggs produced in the ACT — it could not
prevent the sale of eggs in the ACT produced by battery hens in other states. The
possibility of ‘imports’ would clearly undermine the intent of the amended
legislation. However, the MRA includes provision for exemptions. Exemptions have
been granted in a number of instances, such as a Tasmanian law relating to the sale
of crayfish and a South Australian law relating to beverage containers. The ACT
will seek an exemption under the MRA for section 24A(1) of the Food
(Amendment) Act 1997 (box 1.1).
However, an exemption under the MRA has the impact of reducing competition
because it would prevent producers in neighbouring states selling battery eggs in the
ACT.2 This restriction on competition invokes the Competition Principles
Agreement — to which the Commonwealth and all State and Territory Governments
committed to in 1995 — and the requirement for a public benefit test.
Notably, the ACT Government is not seeking an exemption under the MRA for the
new labelling requirements (Section 24B of the Food (Amendment) Act 1997). This
implies that egg producers outside the ACT will be able to sell eggs in the ACT
without having to label them in the prescribed way. However, in the six year period
prior to the implementation of the ban, any ACT producers, most notably the major
ACT egg producer — Bartter Enterprises’ property ‘Parkwood’ — will be required
to label its eggs. For example, Parkwood would be required to indicate that its eggs
1
The mutual recognition of regulations — introduced by Australian governments in March 1993
— aims to remove regulatory barriers to the free flow of goods and labour between Australian
states and territories. It involves each jurisdiction recognising the regulations established by other
jurisdictions, even if they are different from their own rules and regulations. While the Mutual
Recognition Act is a Commonwealth Act, it is binding because each state and territory have passed
Acts which either refer to or duplicate the Commonwealth Act. The relevant Act for the ACT is the
Mutual Recognition (ACT) Act of 21 December 1992. See ORR (1997) for further details.
2
There is also a question of whether the proposed legislation breaches section 92 of the
Constitution, which requires that trade, commerce and intercourse amongst the states be absolutely
free. This issue is discussed in chapter 3.
4
BATTERY EGGS
are produced by battery caged hens. Because the labelling requirement will not
apply to ‘imported’ eggs, labelled Parkwood eggs may be at a competitive
disadvantage relative to any unlabelled imported eggs. The potential impact on
competition again invokes the CPA and a requirement for an appraisal of the
benefits and costs of the legislative change. Figure 1.1 shows how the recent ACT
legislative amendments interact with the CPA and the MRA.
1.3
What is a public benefit test?
A guiding principle of the CPA (Governments of Australia 1995, p. 8) is that
legislation enacted by Australian governments should not restrict competition,
unless it can be demonstrated that:
•
the benefits of the restriction to the community as a whole outweigh the costs;
and
•
the objectives of the legislation can only be achieved by restricting competition.
This constitutes the public benefit test. The terms of reference (appendix A) set out
in greater detail some of the important features of such a test, though it does not
limit the matters which may be taken into account. The terms of reference also state
that the Commission “... shall not be limited to benefits and costs arising within the
ACT only”.
It should be noted that the test does not represent an imposition of the
Commonwealth or other states on the ACT, but rather an agreed process which all
Australian heads of government have endorsed, on behalf of their constituents. The
outcome of the public benefit test is only one input into the process of law-making
and review (figure 1.1). Australian heads of government decide whether to grant an
exemption under the MRA, and the ACT Government decides whether any further
amendment of the labelling requirement under section 24B of the Food
(Amendment) Act 1997 is required.
1.4
What is the scope of the public benefit test?
In the case of the exemption under the MRA, the test relates to the public benefit of
that exemption, not to the original legislative amendment passed by the ACT
Legislative Assembly. However, this amounts to the same thing.
INTRODUCTION
5
Figure 1.1
Interactions between relevant legislation
Section 24B of the FAA97 requires
that all egg cartons displayed or sold in
the ACT be labelled with the
conditions under which the hens
produced the eggs
Regulation to be made under the
FAA97 to allow for expressions to be
used on cartons
Food (Amendment Act) 1997
[FAA97] passed 19-9-97
Because no exemption is sought
under the MRA92, imported cartons
will not have to comply, and ACT
producers may be competitively
disadvantaged
Section 24A(1) of the FAA97 states
that a person shall not sell eggs
produced by a hen kept in a manner
which constitutes an offence against a
law of the Territory or that would
constitute such an offence if the hen
were so kept in the Territory.
Animal Welfare (Amendment) Act
1997 [AWA97] passed 19-9-97
Section 9A states that a persons shall
not keep hens for the purpose of egg
production in a battery cage system in
the ACT
Implementation is expected by
September 1999
Competition Principles Agreement
1995 [CPA95]
Public benefit test required because of
the CPA95
input
input
ACT Government decides if any
legislative change is warranted
Exemption unanimously
agreed by Heads of
Government
Mutual Recognition Act 1992
[MRA92]
Section 24A(1) of the FAA97 is added
to the permanent exemptions listed at
schedule 2 of the MRA92
Section 9A of the AWA97 is
implemented 6 years later, which then
also brings into force section 24A(1) of
the FAA97
The relevant provisions of the AWA 97
will commence 6 years after the date
on which an exemption is granted for
section 24A(1) of the FAA 97 in the
Mutual Recognition Act 1992
[MRA92]
The exemption under the MRA92
would ban imports of battery hen
eggs, thus affecting competition.
Chief Minister to write to heads of
government to get agreement for a
permanent exemption
Exemption not
unanimously agreed
by Heads of Government
Relevant provisions of the AWA97 are
not implemented, and therefore
section 24A(1) of the FAA97 would not
restrict sale of eggs from
battery-caged hens
Source: Based on information provided by the ACT Government.
This is because, in the absence of an exemption under the MRA, the Animal
Welfare (Amendment) Act 1997 will not be implemented. That, in turn, changes the
interpretation placed by the Food (Amendment) Act on what would constitute an
6
BATTERY EGGS
offence. If the exemption is not granted, battery egg production and sale would
continue to be legal in the ACT. Accordingly, the public benefit tests can effectively
be seen as tests of the original legislative amendments.
1.5
Consultative processes
The study commenced in early August 1998 to run for about ten weeks. The
Commission advertised the study and sought public submissions by 9 September
1998. Over 100 submissions were received (appendix B). Major submissions were
distributed for comment to all organisations that made a submission.
The Commission held discussions with many of the key stakeholders including
representatives of animal welfare groups, relevant ACT and Commonwealth
government officials, scientists with expertise in the area and producers (appendix
B). It also inspected farm enterprises operating each of the three main egg
production systems.
1.6
Structure of the report
Chapter 2 sets out a framework for examining how the legislation affects the
interests of animals, producers and consumers. The following chapter considers
factors which could influence the effectiveness of the legislation. The likely impacts
of the legislation on animal welfare, producers and consumers are assessed in
chapters 4 to 6. Chapter 7 briefly explores a range of other issues relevant to the
public benefit tests. Finally, chapter 8 sets out the conclusions for public policy.
INTRODUCTION
7
2
A framework for analysis
2.1
Introduction
The broad framework for undertaking public benefit tests is set out in the
Competition Principles Agreement (Subclause 1 (3)) and replicated in the terms of
reference for this study. In brief, factors which, where relevant, should be taken into
account include:
•
government legislation and policies relating to ecologically sustainable
development;
•
social welfare and equity considerations;
•
government legislation and policies relating to matters such as occupational
health and safety, industrial relations and access and equity;
•
economic and regional development, including employment and investment
growth;
•
the interests of consumers;
•
the competitiveness of Australian businesses; and
•
the efficient allocation of resources.
It is important to recognise that these factors require consideration of issues far
broader then those that are commonly perceived as being addressed in ‘economic’
assessments. For example, they call for consideration of environmental matters and
social welfare and equity issues. Indeed, as far as possible, the public benefit test
should consider all relevant factors.
The need to consider all factors — not just economic benefits and costs — is
reinforced by the study’s terms of reference. These specifically request that account
also be taken of:
•
the social benefits and costs of different egg production systems; and
•
the environmental benefits and costs of different egg production systems.
In the context of this study, it is essential that a broadly based test be applied,
particularly to the more complex and significant of the two public benefit tests
A FRAMEWORK FOR
ANALYSIS
9
undertaken in this study — the ACT ban on the production and sale of eggs from
battery hens. This involves consideration of ethical questions concerning animal
welfare, about which some in the community hold passionate views.
It seems likely that most people — including animal welfare groups — are prepared
to accept that is it appropriate to rear animals for commercial use, including for
human consumption. But, for many, this ‘trade-off’ is conditional on appropriate
‘housing’ and sound animal husbandry practices to ensure that the animals do not
suffer unduly. However, there are quite divergent views about where the boundaries
lie. For instance:
•
the concerns of some vary according to the type of animal (eg between
kangaroos and hens);
•
there are differing perceptions about animal rights;
•
views vary on how welfare can be best assessed; and
•
there are large differences in the level of understanding of different people about
the impacts of various husbandry practices on animal welfare.
This latter difference is not unexpected given the complexities and uncertainties
involved in assessing animal welfare. For instance, Baxter (1994, p. 614) comments:
The welfare of animals is an intrinsically difficult subject to study scientifically. The
central issue in animal welfare is to determine what the animal itself is experiencing ...
something that scientists cannot at present (and probably will never be able to) measure
directly.
Despite such information deficiencies, it is important that existing information be
drawn upon to arrive at some understanding of these inherently complex issues.
Although there are obvious difficulties in assessing the analytical rigour and the
relevance of the findings of the numerous (often conflicting) studies which examine
factors pertinent to this study, the Commission has tried to set out the relevant
benefits and costs in a systematic and objective fashion. To this end, the study seeks
to distinguish between ‘facts’ and popular ‘myths’, and between factors which are
common to all egg production systems and those peculiar to particular systems, in
part by consulting with a representative range of stakeholders and, as far as
possible, pursuing transparent processes.
The following section briefly identifies the key issues that are important for
assessing whether the ACT legislative amendments are likely to yield net public
benefits.
10
BATTERY EGGS
2.2
Key issues
The legislative amendments applying to the production, sale and labelling of eggs
passed by the ACT Legislative Assembly have been outlined in chapter 1.
Underpinning the amendments are some hypotheses which clarify the main issues.
These imply that:
•
the legislative changes are legally and administratively feasible (ie the intent of
the legislative changes — an effective ban on battery egg sales and a change in
labelling — cannot be undermined by loopholes in the legislation or changes in
the behaviour of producers or consumers);
•
hen welfare would be improved in non-battery alternatives;
•
any gains from improved hen welfare achieved by implementing the ban
outweigh the costs;
•
no alternative actions would achieve better outcomes; and
•
consumers would more often freely choose non-battery alternatives (with
resulting improvements in animal welfare) if they were better informed about the
production system used to produce the various brands and types of eggs
available to them. This implies that consumers cannot reliably infer this
information from existing labelling.
These hypotheses — and the policy implications that follow from their analysis —
are set out diagrammatically in figure 2.1. The figure necessarily simplifies the
policy decision making process — for instance, by assuming the availability of
sufficient information to say ‘yes’ or ‘no’ to the major questions. This framework
suggests that, as a starting point, the legal and administrative effectiveness of a ban
should be appraised, for example, to examine the risk of loopholes (chapter 3). If
the intent of the legislation could not be achieved, this would suggest further
amendments or the adoption of other policies.
Presuming the amendments are legally and administratively effective, the next step
is to define and measure animal welfare and appraise how welfare is affected in
different egg production systems (chapter 4). If there were no apparent increase in
animal welfare from banning battery cage systems, then the regulation would have
failed its most essential criterion.
A FRAMEWORK FOR
ANALYSIS
11
Figure 2.1
Framework for assessing the costs versus benefits
POLICY RATIONALE:
Animal welfare
concerns
Use these other
policies
Yes
Are the amendments
administratively &
legally feasible? (eg
loopholes?)
No
Are there other hen
welfare policies with
net benefits
No
No action
Yes
Do non-battery
systems improve hen
welfare?
No
Don’t ban battery
eggs, nor enforce
labelling
Yes
In what ways and by
how much do
alternative systems
improve hen welfare?
No
Any anomalies?
(eg ignorance,
misperceptions &
externalties)
What costs are
associated with
alternative systems?
Is the trade-off
between welfare and
costs ’worth’ it?
Preferences of people
Yes
Are there other or
supplementary
policies with better
outcomes?
Yes
Use these policies
12
BATTERY EGGS
Ethical judgements
No
Ban battery eggs, and
enforce labelling
Animal rights
If the ban does achieve some improvements in animal welfare, some assessment is
needed of the costs and benefits of these improvements. The major cost factors are
relatively easy to identify (eg higher egg prices for some domestic and commercial
users, capital costs borne by Parkwood (the major ACT producer), possible job
losses and additional administration costs (chapters 5, 6 and 7)). With the available
information, it is possible to obtain reasonable estimates of some of these costs. On
the other hand, assessing the extent and value of the benefits stemming from animal
welfare improvements is extremely complex. This is because people’s preferences
for animal welfare may be partly masked by misperceptions and poor information
(which provides the rationale for the labelling provisions). As well, animal welfare
is an ethical concern, and this suggests that community standards and animal rights,
rather than consumer preferences, may be an appropriate basis on which to judge
what is ‘right’ (or in the public interest).
Even if it appears that excluding battery hen eggs from the ACT market is in the
public interest, this does not address the question as to whether a legislative ban is
the best policy response — alternative and supplementary policies should be
examined to see if they could produce a similar, or better, outcome (chapter 8).
The following chapters look at these issues in more detail.
A FRAMEWORK FOR
ANALYSIS
13
3
Effectiveness of the ACT legislation
It is important to consider whether the legislation passed in the ACT would be
effective in achieving its stated goals, or whether actions by producers, other players
in the supply chain or consumers could undermine its effectiveness. To this end, this
chapter discusses the likely effects of a range of possible responses.
3.1
Section 69 challenge
Section 92 of the Australian Constitution provides for free trade between States, but
does not apply to trade between a State and a Territory. However, Section 69 of the
Australian Capital Territory (Self Government) Act 1988 applies the intent of
Section 92 to the ACT. It states that:
... trade, commerce and intercourse between the Territory and a State, and between the
Territory and the Northern Territory, the Jervis Bay Territory, the Territory of
Christmas Island or the Territory of Cocos (Keeling) Islands, shall be absolutely free.
(Section 69 (1))
In the light of these provisions, it needs to be considered whether an interstate
producer could challenge the ACT legislation on the grounds that it is contrary to
the Self Government Act. If this were the case, the ACT legislative amendments
would not be effective in preventing the sale of eggs from battery cage hens — it
would merely result in the ACT demand for such eggs being satisfied entirely by
interstate producers rather than by a mixture of interstate and local sources as
happens at present.
Legal advice supplied to the Commission draws on a 1988 decision by the High
Court concerning Tasmanian legislation which specified the minimum size of
crayfish that could be bought or sold in the State (Cole v. Whitfield (1988)) and the
underlying intent of Section 92 of the Constitution. This advice suggests that the
resolution of this issue hinges on whether the ACT legislation can be characterised
as ‘protectionist’.
The legal advice concludes that the ACT legislation could be viewed as representing
a burden on trade (because it bans ‘imports’ of battery eggs), but that it is not
discriminatory in the sense that it does not differentiate between producers in the
ACT and those located in other jurisdictions. Hence, the advice suggests that the
EFFECTIVENESS OF
THE ACT
LEGISLATION
15
ACT legislation could not be characterised as ‘protectionist’ — the restrictions are
necessary if the legislation is to achieve its intended goals.
In the absence of a case testing the legislation in the courts, it is not possible to
assert that ACT legislation is immune from legal challenges. Nonetheless, on the
basis of the information currently available, this seems likely.
3.2
Differential labelling provisions
As noted in chapter 1, the ACT Government’s proposal for a national standard for
egg packaging was not agreed to by the Australia and New Zealand Food Standards
Council. In addition, the ACT Government has not sought an exemption under the
Mutual Recognition Act (MRA) for the labelling amendments. Consequently, the
requirement to label all egg cartons displayed or sold in the Territory with the
conditions under which the hens produced the eggs would not apply to eggs
imported from other jurisdictions.
Presuming the MRA exemption for the ban is granted, in the period between the
introduction of the labelling requirement and the time the Animal Welfare Act
comes into force (six years after the granting of the exemption), interstate producers
would be able to sell battery eggs in the ACT that are not identified as such.
In practice, some interstate suppliers may elect to comply with the ‘spirit’ of the law
and label their battery eggs accordingly. In that event, any effects that labelling has
in reducing the share of the ACT egg market supplied by battery hens would be
spread evenly over all suppliers of battery eggs. On the other hand, the absence of a
legal obligation to label their eggs may provide interstate producers with a
commercial advantage over Parkwood (who would be obliged to comply with the
labelling requirements). As a result, some interstate suppliers of battery eggs may
not label their eggs. This could have two effects:
•
sales of battery hen eggs would be higher than would be the case if all eggs were
labelled; and
•
interstate producers of unlabelled battery eggs may gain market share at the
expense of Parkwood.
In the latter circumstances, the effectiveness of the ACT legislation would be
reduced by the sale of unlabelled imported battery hen eggs. However, this would
not be a longer term problem because, once the six year transition period ends (and
again presuming an MRA exemption is gained), the sale of all battery hen eggs in
the ACT will be prohibited. Consequently, the only unlabelled eggs that could be
16
BATTERY EGGS
legally sold in the ACT would be non-battery eggs sourced from interstate
producers. In this situation, it is likely that interstate suppliers of such eggs would
label them (as they currently do) because they may otherwise be at a disadvantage
relative to sellers of labelled eggs. However, irrespective of whether interstate
producers label or do not label their eggs, the ACT labelling amendments would not
materially detract from the Government’s objective to ban the sale of battery eggs in
the Territory once the six-year transitional period has expired.
3.3
Purchase of eggs from interstate
If the ban comes into place, some domestic and commercial consumers might
choose to buy eggs in New South Wales. To the extent that this occurred, the ACT
ban would merely alter the locations from which eggs are purchased, and have no
impact on total sales of battery eggs or the number of hens housed in battery cage
systems.
As discussed in chapter 6, the majority of egg consumption in the ACT — around
80 per cent — is consumed directly by households. The remainder is consumed
indirectly — via purchases of goods that incorporate eggs (eg restaurant meals and
bakery products).
For domestic egg users, changes in shopping patterns would be most likely for those
residents of Queanbeyan and other border towns that usually shop in the ACT. For
these consumers, the inconvenience of buying eggs in (say) Queanbeyan may be
minor compared to the potential savings. In the case of Canberra residents, the
savings are unlikely to outweigh the inconvenience of shopping interstate, except
for a relatively small number of users (eg consumers of large numbers of eggs
and/or those living or working close to an interstate seller).
The trade-off between convenience and savings would also be relevant for some
commercial users (eg fast food outlets, clubs and restaurants). However, many of
the largest ACT commercial users — such as bakeries and cake producers —
already buy eggs in forms which are unaffected by the proposed ban (eg dehydrated
or liquid egg).
Overall, it seems probable that some consumers will avoid the ban by purchasing
battery eggs interstate. However, these sales are likely to represent only a very small
proportion of total ACT sales.
EFFECTIVENESS OF
THE ACT
LEGISLATION
17
3.4
Eggs imported from other countries
The ACT is a signatory to the Trans-Tasman Mutual Recognition Arrangement
(TTMRA) which came into operation on 1 May 1998. This provides for the
extension of the mutual recognition principle to goods of New Zealand origin. As a
consequence of the TTMRA, the ACT Government contended that:
... New Zealand produced battery hen eggs that could be sold in New Zealand could
also be sold in the ACT, even if Section 24A(1) of the Food (Amendment) Act 1997 was
added to the Permanent Exemptions Schedule to the Mutual Recognition Act 1992.
That is, while Australian produced battery hen eggs would be banned in the ACT, New
Zealand produced battery hen eggs could still be sold in the ACT. (sub. 74, p. 4)
The ACT Government did not suggest that, in practice, there would be a likelihood
of New Zealand egg imports. This may reflect the fact that, at present, quarantine
restrictions prohibit the importation of fresh eggs into Australia
Even if it were possible to import fresh eggs from New Zealand, it is not clear that
this would be a commercially attractive proposition. Transport could pose some
difficulties. First of all there is the cost. Eggs are a relatively bulky, low value
product. Thus, transport costs — in New Zealand, for the cross-Tasman leg and in
Australia — would be significant. The reliability of transport services would also be
a factor. As eggs have a limited shelf life, the capacity to use locally held
inventories to ensure ongoing supplies in the face of hold-ups in the transport chain
would be less than that for many other products.
3.5
Substitution effects
Some large commercial users who presently use fresh battery hen eggs may be able
to switch to egg products made from battery eggs which are exempt from the ACT
ban (eg dehydrated egg). There is little information available to assess the likelihood
and extent of this. However, as noted above, many large commercial users already
use egg derivatives. For some other commercial users (such as fast food outlets),
substitution may not be viable. The possibility of substitution for households is also
low. Accordingly, substitution between battery hen eggs and egg products
unaffected by the ban (eg egg powder) would be minor.
3.6
Enforcement
An egg produced by a battery hen is no different in appearance to an egg produced
by a hen housed in any other egg production system. This raises an important
18
BATTERY EGGS
enforcement issue — it is conceivable that, in the event of a ban, some eggs
produced in battery cage systems could be misrepresented as non-battery eggs.
There are, of course, risks involved for those who are prepared to engage in such
illegal activities. For the large retail chains — that collectively account for the
majority of domestic egg sales in the ACT — the risks are almost certainly too high.
If they were implicated in any illegal actions, the damage to their reputation (and
sales) would considerably outweigh the potentially higher returns on egg sales.
Similar considerations apply to large egg producers.
Small producers and small retailers may face lower risks. Nonetheless, financial
penalties and/or the loss of business would undoubtedly loom large in the minds of
most small players.
The probability of illegal activity being detected will, in part, depend upon the
enforcement strategies pursued by the ACT Government. Given the significant
financial advantage that could be gained if battery hen eggs were sold in the ACT as
non-battery eggs, illegal suppliers would also risk being reported to the authorities
by competitors in the market who would feel ‘cheated’ by such illegal activities.
In summary, some eggs from battery hens may be misrepresented and sold in the
ACT market as non-battery eggs if the proposed ban comes into play. However, in
the Commission’s view, illegal activities will largely be confined to the market
fringes, and are unlikely to represent a very significant proportion of total ACT egg
sales.
3.7
Summary
In common with most regulations, some of the parties affected by the ACT
legislative amendments will have incentives to organise their affairs so that they can
avoid the ban altogether or, alternatively, minimise any adverse effects on them.
Some legal responses — such as purchasing eggs interstate and switching to the use
of battery eggs in a form unaffected by the ban (eg dehydrated egg) — and illegal
responses (misrepresenting battery eggs) could undermine the intent of the ACT
legislative amendments. However, the Commission considers such activities are not
likely to pose a significant threat to the underlying objectives of the ACT legislative
amendments.
EFFECTIVENESS OF
THE ACT
LEGISLATION
19
4
Animal welfare issues
The underlying objective of the ACT legislative changes is to improve the welfare
of hens. This suggests a number of issues:
•
what is meant by ‘animal welfare’?
•
what are appropriate measures of animal welfare?
•
what are the characteristics of hens and how do they affect assessments of
welfare?
•
what is the nature of existing egg production systems and what will replace
battery egg production if the ban is implemented? Do they increase or decrease
hen welfare?
•
what is the nature and adequacy of existing approaches to animal welfare, such
as codes of conduct?
•
are economic incentives for producers likely to lead to good animal welfare
outcomes? and
•
what is the relevance of ‘cruelty’ to the proposed ban?
Each of these issues is explored in turn. 1
4.1
What is meant by animal welfare?
The concept of animal welfare
Animal welfare is an elusive concept. This reflects the concept’s numerous
dimensions, the fact that welfare has a mental as well as a physical aspect, the
importance of people’s subjective evaluations and its historical roots. For example,
the French philosopher, René Descartes, with a perspective quite foreign to current
community standards, saw animals as ‘mechanical robots’ without feelings or pain
1 There is a massive amount of research into layer hens and their welfare. People who are interested
in quickly discovering more about the complex issues may want to examine the following
references: Temple (1994), Appleby et al (1992) and Dawkins (1980). They provide an unbiased
and scientific account of the relevant welfare issues.
ANIMAL WELFARE
ISSUES
21
sensation. He marvelled that these automatons “could give such a realistic illusion
of agony.”2 In the late 18th century, Jeremy Bentham argued that animal welfare
was a legitimate concern because animals could suffer — starting the modern
scientific (and ethical) consideration of animal welfare. In the 1960s, as intensive
farming grew to ascendancy, there was increasing public concern about the impacts
of farming practices on animal welfare. The Brambell Report (1965) into animal
welfare in the UK was the precursor to many other examinations of the impacts of
intensive livestock husbandry systems on animals — and established a framework
for looking at such animal welfare issues. Bowling (1989) described some of the
historical aspects of the development of animal welfare as a popular public concern
in Australia.
To make assessments of animal welfare, some tools for thinking about and
measuring animal welfare are needed. It is particularly important to separate
scientific assessments of welfare from attitudes and moral judgements about what is
appropriate. Two leading UK researchers note:
We should use the word “welfare” in a scientific way so that it is useful when
considering animal management or when phrasing legislation. Welfare is a characteristic
of an animal, not something given to it, and can be measured using an array of
indicators. (Broom 1991, p. 4174)
... if people feel that it is important to try to change the laws about the treatment of
animals, they must have more to go on than just their intuition. ‘Suffering’ must be
recognisable in some objective way. Otherwise the laws which emerge are almost bound
to be arbitrary and might even fail to improve the lot of animals much, if at all. (Dawkins
1980, p. 2)
A framework for analysis
The framework for gauging and valuing animal welfare is outlined in figure 4.1.
Since the objective of this chapter is to compare the impacts of different egg
production systems on the welfare of layer hens, the logical starting point for such
an analysis is to objectively describe and measure the physical environment of each
system. Coupled with other factors, including the birds’ genetic make-up and age,
the physical environment elicits physical, behavioural and mental responses from
hens. These responses tend to interact with each other.
2
22
Encyclopaedia Britannica under ‘Cruelty’ (1998 edition).
BATTERY EGGS
Figure 4.1
Framework for evaluating animal welfare
The production
system
(eg battery,
free-range)
The housing
environment
(eg stocking rate,
temperature variation)
Physical state of hen
(eg mortality rates,
egg rates)
Husbandry
practices
(eg inspection, care
of birds, maintenance)
Mental state of hen
(eg fear, frustration,
experience of pain)
Hen behaviour
(eg f eather pecking)
Framew ork,
definitions,
measurement and
perception
Overall animal
welfare
Preferences, ethical
judgments & animal
rights
Judgment of
adequacy
ANIMAL WELFARE
ISSUES
23
The current scientific approach to measuring animal welfare is to use a variety of
measures (Dawkins 1980, pp. 2–3; Hemsworth and Barnett 1993, p. 101 and Broom
1991, p. 4168) to build up an overall picture of welfare. There is now broad
agreement on the dimensions of hen welfare, such as mortality, adequate nutrition,
rates of feather pecking, fear responses and the ability to undertake behaviours that
hens value. There is also strong (but not complete3) agreement about what
constitutes a better welfare outcome for each of the dimensions. Moreover, there is
also a growing, though still deficient4, body of literature which measures particular
aspects of welfare in different systems. The greatest difficulty is assembling the
various indicators into a summary measure of hen welfare:
Although the welfare difference between some systems may be unequivocal it will be
less clear in other comparisons because there are advantages to a system in some aspects
and disadvantages in others. A problem then is the weighing of advantages and
disadvantages. (Scientific Veterinary Committee 1996, p. 99)
Even if people agree on the objective state of hen welfare in any one system, their
judgement about whether that state is acceptable or not will vary, depending on
ethical values and preferences.
Finally, the Commission notes that animal husbandry practices — briefly reviewed
in the next sub-section — are relatively weakly influenced (hence the dotted line in
figure 4.1) by the type of housing system, but play a critical role in determining the
welfare of hens.
The importance of husbandry
During discussions with both producers and animal welfare experts, the
Commission was told of the crucial importance of appropriate animal husbandry to
animal welfare. As the Standing Committee on Agriculture and Resource
Management (1995, p. 1) indicates:
The importance of good stockmanship in animal welfare cannot be over-emphasised.
Persons responsible for the care of poultry should be well trained, experienced and
dedicated.
3 For example, it has been claimed that increases in floor space in cages may allow greater exercise,
but may also increase aggressive pecking in White Leghorns (Working Group of the National
Layer Hen Housing Review 1994, p. 147).
4 The Working Group of the National Layer Hen Housing Review (1994, p. 64 and p. 131) argued
that there was a range of, sometimes severe, shortcomings of poultry science in guiding policy for
preferred housing systems.
24
BATTERY EGGS
This includes practices which minimise fear in birds, appropriate maintenance of the
sheds and feeding and watering systems, diligent inspection of birds, appropriate
removal of spent hens, attention to cleanliness and a range of other factors. For
example:
•
Fear — Barnett, Hemsworth and Newman (1992) found that hens’ fear of
people explained a high proportion of the variation in the egg productivity of
hens. Hemsworth et al (1993) found that small differences in the behaviour of
people entering housing systems had a significant impact on the fear levels of
hens. Barnett et al (1993 and 1994) found that birds were much less fearful of
people in all sorts of contexts if they were familiar with people. Birds with a lack
of familiarity with people had lower productivity and higher stress hormone
levels when they experienced human contact.
•
Fractures — Gregory et al (1992) found that removing birds from cages by both
legs reduced femur breakages from 7.4 per cent to just below 1 per cent.
Appropriate animal husbandry practices are essential to good animal welfare
outcomes in all systems of production. Different systems require different practices
and the development of different bodies of knowledge — underlining the
importance of research if systems of production are changed significantly.
Moreover, different systems may affect some aspects of husbandry, although the
links from production systems to management are weak. However:
•
elevated dust and ammonia levels and the risk of falling faeces in some multilevel non-battery alternatives may discourage staff from entering the sheds to
undertake sufficiently frequent and careful inspection and maintenance;
•
staff to bird ratios are higher in non-battery systems (due to lower stocking
densities) — which may increase hens’ familiarity with humans (thus reducing
fear);
•
multi-tier cages in a modern cage system can have very high and very low cages
which are difficult to inspect without bending or straining by staff, affecting the
extent of diligent inspection (Farm Animal Welfare Council 1997, p. 20). As
well, immobile sick and dead birds may be more easily detected in barn and freerange systems than in battery cage systems. On the other hand, individual
inspection of mobile birds is difficult in non-battery systems; and
•
there are a wider repertoire of tasks for staff caring for hens in alternative
systems. Floor eggs need to be collected, pecked birds need treatment and
outbreaks of cannibalism managed or avoided.
Overall, the less automated and controlled nature of non-battery systems requires
greater husbandry skills (and more labour) than the battery cage system. These
ANIMAL WELFARE
ISSUES
25
greater requirements are included as an additional cost of production in chapter 5. It
would be important to ensure appropriate husbandry after any changes in legislation
or codes of practice. Assuming that these take place, husbandry can be ignored
when comparing the different housing systems.
The role of physical versus other indicators
Most scientists and animal welfare groups argue that physical indicators, such as
mortality, sickness, stress hormone levels, immuno-suppression and egg production
rates per bird, are, all other things being equal, important barometers of bird
welfare. While there is agreement on many of these measures of welfare, there is
divergent interpretation of some. For example, a hen may show heightened stress
hormone levels in some production systems, but it is unclear whether this is ‘good’
or ‘bad’ stress (Temple 1994, p. 14). Similarly, egg production per bird, combined
with mortality, defines the ‘biological fitness’ of a hen, but it may not correspond to
a higher rate of mental or physical well-being.
It is now generally recognised that physically manifested welfare indications are
only part of the story, and that it is important to use scientific experiments to try to
infer the ‘mental’ and ‘motivational’ states of hens.5 A major challenge for
scientists has been to impute the elusive underlying mental state of animals (and
their preferences) from their behaviour.
Some of the major questions about this aspect of the welfare of hens relevant to the
comparison of battery cage versus alternative systems are:
•
how important is it that birds be able to perform natural behaviours, such as
dust-bathing, pecking, perching and nesting?
•
what are the behavioural indications of stress, fear, boredom and frustration in
layer hens, and how do these signs vary by type of production system?
•
how important do birds find access to natural light, and to freedom to walk
around outside?
•
what are the trade-offs between physical and mental welfare of hens?
A problem in inferring the mental state of hens from their behaviour is one of
interpretation. Different people may interpret the same behavioural evidence
differently. For example, layer hens in cages sometimes engage in ‘vacuum bathing’
5 For example, this has been acknowledged by Dawkins 1980, Broom 1991, the [EC] Scientific
Veterinary Committee 1996, the [Australian] Working Group of the National Layer Hen Housing
Review 1994 and the [UK] Farm Animal Welfare Council 1997.
26
BATTERY EGGS
on the floors of their wire cage. This practice may reflect a desire to engage in dust
bathing, a common behaviour in non-caged environments. However, whether this
practice indicates a degree of psychological deprivation for hens is open to
individual interpretation. Some see such behaviour as aberrant, indicating a source
of frustration and stress for the hen, thus representing a diminution in welfare. On
the other hand, ‘vacuum bathing’ may, at the mental level of the hen, be a substitute
for genuine dust bathing. One of the virtues of the revealed preference tests
(described in section 4.6) is that they measure the extent to which hens themselves
value certain attributes of their environment (such as a genuine dust bath) and, thus,
reduce the importance of human perceptions.
A range of indicators that can be used to help assess both the physical and mental
welfare of hens is set out in table 4.1. However, in applying these welfare
indicators, it is also necessary to take account of the nature of the species whose
welfare is being assessed. Accordingly, the nature of layer hens and the life cycle of
hens within any of the intensive farm systems is described next.
Table 4.1
Aspects of animal welfare
Physical indicators
Housing quality factors
Behavioural indicators
Husbandry
Mortality rate
Litter quality
Dust-bathing
Ability to practice
good husbandry
Sickness
Lighting
Perching
Variability in
outcomes
Cannibalism
Temperature control
Nesting
Predation
Air quality (dust, ammonia)
Wing stretching
Injury without death
Food quality and access
Pecking in litter
Infectious diseases
Water quality and access
Ability to exercise
Non-infectious metabolic disorders
Medicines & supplements
Social interaction
Skeletal problems (eg fractures)
Faeces control
Sun-bathing
Foot problems
Ability to inspect
Expressions of fear
De-feathering
Environmental control (shelter
from rain, sun and extreme
temperatures)
Mimicked behaviours
Immuno-suppression
Stress hormone presence
Egg production rate per bird
Bird weight
Beak-trimming (de-beaking)
4.2
The hen
Hens were domesticated about 8 000 years ago from Red Jungle Fowl (Temple
1994, p. 5). They are social animals that congregate in flocks and establish a clear
ANIMAL WELFARE
ISSUES
27
social order. They can recognise about 80 to 100 other birds in a flock, though
natural flock sizes are usually smaller (ANZFAS 1994, p. 13). They have about 20
distinguishable calls, each given in a separate and definable context. While they
evolved from reptiles, they have brain masses six to eleven times larger than those
found in reptiles of a similar body size. They have good colour vision and sensitive
touch (particularly through the beak) and hearing.
Wings are mainly used to control temperature, with birds flying short distances
only. Feathers moult on a yearly basis. The feathers protect a delicate skin which is
easily subject to damage if feathers are lost (Temple 1994, p. 5).
Despite significant breeding for egg number and size, modern hens still display most
behaviour seen in their wild counterparts. Appleby et al (1992) indicate that hens
were selected for fighting ability for some time, so that modern breeds tend to be
aggressive. This intensifies problems of feather pecking and cannibalism for all
intensive systems of egg production, but particularly ones where large numbers of
birds intermingle.
Eggs are produced on a 24 hour cycle, with a healthy chicken producing up to 300
eggs per year (compared to 10 to 20 eggs per year in the jungle fowl; Appleby et al
1992). Healthy birds live for around six years.
4.3
What is the life cycle of hens in intensive farming
systems?
Chicks begin their lives in a rearing or breeding unit. They are hatched and housed
either in a deep litter or a rearing cage. One day old chicks are sorted into males and
females, with the males being killed.6 Most chicks have their beaks partly removed
at one day old (and also often again at 20 weeks) regardless of the production
system for which they are destined. This operation is undertaken to reduce the risks
of feather pecking and cannibalism. It involves removal of between a third and a
half of both the lower and upper beaks. While necessary for good husbandry
reasons, beak trimming also causes pain in the hen, which may be chronic for some
animals due to neuromas (Temple 1994, pp. 25–27).
Point-of-lay hens (aged around 16 to 20 weeks) are typically housed in the relevant
production system for about one year. Cohorts of chickens are kept separate to
6
They are killed by either carbon dioxide gassing or maceration (a macerator chops the male
chicks into small pieces at very high speed). World Animal Net, a worldwide animal welfare
group, noted that, while maceration “sounds horrific, it is generally considered more humane than
gassing” (http://www.worldanimal.net/hen-index.html).
28
BATTERY EGGS
avoid disease transmission between cohorts. This ‘all-in all-out’ policy means that a
shed, or even an entire site, is completely cleared of birds, and then cleaned and
disinfected before the arrival of the next cohort.
At 72 weeks of age, egg production numbers decline and average egg weights
increase. But most critically, egg quality falls (for example, there are more broken
eggs due to thinner shells and more watery albumen) which presents problems for
the producer and consumer. Egg quality and number can be improved after moulting
(ie seasonal feather loss and replacement), so that in some cases birds are kept in
production after 72 weeks.
In most cases, however, ‘spent’ hens are removed for slaughter at 72 weeks,
regardless of the system of production. Hens may suffer a number of injuries,
particularly fractures, during their removal and transport (Temple 1994, p. 33; sub.
76, p. 13). Spent hens are processed into pet food, baby foods, soups and stocks. As
a humane measure, hens are typically electrically stunned prior to throat cutting,
although Barnett and Newman (1997, p. 394) note that “there is little doubt that, in
Australia, many birds are ineffectively stunned.”
It is important to note that these aspects of layer hens’ lives are common across both
battery and commercial non-battery systems. Some people feel unhappy with some
common features of the life of hens in these systems (such as beak trimming, killing
of male chicks or the slaughter of spent hens). These may be important issues in the
welfare of hens, but the fact that they are not special features of the battery caged
hen suggests that they cannot be a basis for preferring non-battery systems over
battery cages.
4.4
Egg production systems: the battery cage and its
alternatives
The battery cage system
Most eggs in Australia and the world are produced in battery cage systems
(illustrated in box 4.1). The battery system was introduced in the US in the 1930s.
By separating the birds from faeces, litter and each other, battery cages reduced
disease risks and cannibalism apparent in the deep litter systems that predominated
at that time (Appleby et al 1992, p. 62). They also allowed easier collection of eggs,
obviated egg cleaning and, over time, permitted automation of most processes
involved in egg farming (such as provision of water and food and collection of
eggs).
ANIMAL WELFARE
ISSUES
29
Hens are permanently enclosed in cages in buildings, so that they receive some
protection from the weather and predators. Food and water are supplied on a
continuous basis.
Box 4.1
The battery cage system
Source: Photo taken by the Commission with permission from a producer.
Older battery cage systems consist of single level cages, relatively primitive
temperature control and manual egg collection. Newer types involve tiers of cages,
climate control and automatic egg collection.
Farms usually house large numbers of birds — and flock sizes have typically
increased over time. In the larger production units, there can be around a quarter of
a million hens, with around 30 000 hens per shed.
Cages are constructed of welded wire, including the floor, and typically house
between 3 and 5 birds, depending on cage size. The floor slopes downward towards
the front so that any egg rolls out of the cage. Access to water and food is through
an open section at the front of the cage. In the ACT, each hen must have at least 450
square centimetres of space (which is just under three-quarters of the size of an A4
30
BATTERY EGGS
piece of paper).7 This mandatory rate applies to birds under 2.4 kilograms (which
are the majority of birds). Birds with a weight exceeding 2.4 kilograms have a
mandatory minimum of 600 square centimetres (slightly bigger than an A4 piece of
paper). However, minimum standards may be exceeded. The effective space
available to each bird is also bigger than the allowance per bird suggests because a
hen can put its head outside the cage to feed and can move around the cage it shares
with other birds. While birds can move around to some extent, they are not able to
open their wings fully or exercise in the way they could in more open environments.
Other systems
Barn-lay, perchery and aviary systems
These systems consist of controlled environments (closed sheds) with perches, feed
and water on several levels. There may also be provision for nest boxes and space
for stretching or running at ground level. Typically, a part of the floor is covered by
a layer of litter (such as straw) which provides scope for scratching and dust
bathing.
Flock sizes in RSPCA-endorsed Australian barn systems are between 500 and 5000
birds per enclosure at densities of no more than 5 birds per square metre of floor
space (or 2000 cm2 per bird) — though that this excludes an allowance for the space
afforded by perches (RSPCA 1998). Australian barn systems (illustrated in box 4.2)
appear to make less use of the vertical space in the barn than apparent in European
equivalents — where tiers of perches or slatted areas may be provided. Partly
reflecting their greater use of such space, flocking densities (measured in relation to
the floor area) in European barn systems appear to be significantly higher than this,
at around 650 cm2 per bird (Temple 1994, p. 11).
Aviaries are similar to percheries, but there are raised slatted areas, as well as
perches. Temple (1994, p. 12) notes that, occasionally, use of the word ‘aviary’ is
applied when there is no litter floor, or where flock sizes are smaller than
percheries.
Free-range systems
These involve running hens in an open paddock with a central shed or small number
of sheds spread over the paddock for shelter. Typically, the sheds are similar to
7
In the US, hens have a smaller space allowance than this.
ANIMAL WELFARE
ISSUES
31
those used to house hens in the barn system (and provide for nesting boxes, perches
and food and water supply), though, in Australia, the stocking rates in the sheds
tend to be higher than in the barn-lay system.
Box 4.2
An Australian barn-lay system
Source: Photo taken by the Commission with permission from a producer.
Get-away cages and other modified cages
These are enlarged versions of a conventional battery cage. But, whereas battery
cages typically have four or five birds and no perches, get-away cages house 15–30
birds with one or more internal perches. These perches allow the birds to get away
from each other, hence the name. Get-away cages also have attached boxes for
nesting, dust bathing and ground scratching. These cages are not in commercial use
in Australia.
Conventional cages can also be modified to include scope for scratching, perching,
nesting, and to have different flooring or walls. So far, these are not in commercial
use in Australia, though they have some advantages in respect of behavioural
freedoms.
32
BATTERY EGGS
What is likely to replace battery caged systems under a ban?
Evidence on the relative production costs of barn-lay, battery cage and free-range
systems (see chapter 5) suggests that barn-lay is the next cheapest alternative to
battery production. At the moment, most barn-lay production is endorsed by the
RSPCA and must observe stringent standards relating to stocking rates, inspection
and other animal welfare issues. However, it should not be assumed that the
replacement system for battery cages would necessarily be as animal friendly as the
RSPCA standard. European aviaries and percheries, for example, tend to have much
higher stocking rates. Accordingly, while the Commission does make use of some of
the existing RSPCA measures of welfare achieved under its barn-lay system, it also
relies on other evidence about animal welfare outcomes in barn-lay or roughly
equivalent systems in use elsewhere in the world.
4.5
Current approaches to hen welfare
The current industry code of conduct
Australian producers have endorsed the Australian Model Code of Practice
(Standing Committee on Agriculture and Resource Management 1995, p.1) for the
welfare of poultry. The code is a guide rather than a mandatory set of requirements.
The code specifies that the basic needs of poultry are:
•
readily accessible food and water to maintain health and vigour;
•
freedom to move, stand, turn around, stretch, sit and lie down;
•
visual contact with other members of the species;
•
accommodation which provides protection from the weather and which neither
harms nor causes distress; and
•
prevention of disease, injury and vice, and their rapid treatment should they
occur.
While the code emphasises physical aspects of welfare, it implies that some degree
of visual contact and mobility are critical behavioural needs for hens. All major egg
production systems used in Australia, including the battery cage system, comply
with this code.
Other animal codes tend to place more emphasis on behavioural needs and to
specify them differently.
ANIMAL WELFARE
ISSUES
33
Other standards including the five freedoms
In its review of the welfare aspects of layer hen housing, the Working Group of the
National Layer Hen Housing Review (1994) adopted the approach it called the ‘five
welfare freedoms’ (box 4.3).
Box 4.3
The Senate Select Committee’s animal welfare ‘freedoms’
The five freedoms consist of freedom from:
•
hunger and thirst;
•
physical discomfort and pain;
•
injury and disease;
•
fear and stress; and
•
freedom to conform to all essential behaviour patterns.
Source: The Working Group of the National Layer Hen Housing Review (1994).
This approach seems broadly compatible with that of the Australian and New
Zealand Federation of Animal Societies (ANZFS) (box 4.4), except that ANZFS
more clearly specifies the nature of the behavioural needs of hens.
Box 4.4
ANZFAS approach to evaluating animal welfare
ANZFAS has used the following framework to question current intensive animal
production practices and to examine the work of researchers who have provided
objective answers:
Physical health:
Does the animal have adequate food and water?
Is it free from pathogens, injuries or painful deformities?
Behavioural needs:
Which behaviours found in unrestricted populations can animals not perform? What
physical signs of stress do confined animals show?
What behavioural signs of frustration do animals show?
What conditions do animals themselves prefer?
Source: Oogjes (1996).
34
BATTERY EGGS
Taken literally, no farm system can actually (or reasonably be expected to) provide
complete freedom from any of the problems listed in the above codes. For instance,
some hens will inevitably die or become exposed to pathogens. The issue is whether
any given system provides animals with an environment in which these risks are
acceptably small.
There is broad agreement by scientists, animal welfare groups and producers about
how to measure welfare outcomes of the first three indicators in box 4.1. There is
less agreement about what is entailed by essential behaviours or needs8, even if it is
recognised that at least some are important. This is because the word ‘essential’
means different things to different people, as does the degree to which they suppose
that the absence of an essential behaviour translates to a reduced level of animal
welfare.
The role of economic incentives in animal welfare
Some hold the notion that the economic self-interest of poultry farmers tends to lead
to good welfare outcomes. If true, it would tend to minimise requirements for codes
of conduct, other regulations and oversight of poultry farms.
Good economic practice does provide a floor to animal welfare during the
production phase. This is because at some point a cheaper housing environment
increases mortality rates and decreases egg productivity to a point which may not
justify its lower capital or labour costs. However, depending on the relative costs of
labour, cages, buildings and the hen stock, it may be cheaper per egg to run a system
with more intensively stocked cages than currently occurs, even if this decreased
animal welfare along some agreed dimension (such as through elevated mortality
rates). As well, farmers do not have strong economic incentives to care for
individual sick birds or to dispose of ‘spent’ hens humanely.
Accordingly, while farmers typically have considerable concern for the welfare of
their animals (Dawkins 1980, p. 32), it cannot be presumed that economic
incentives guarantee good welfare outcomes. The cheapest system may not provide
‘acceptable’ levels of hen welfare.
8 ‘Needs’ are a difficult concept, whose scope and interpretation is difficult. For example, Jensen
and Toates (1993) argue that needs are hierarchical, rather than present or not present. However,
some scientists, such as Dawkins (1983), are able to test facets of the concept by assessing animal
‘motivation’ through choice experiments.
ANIMAL WELFARE
ISSUES
35
The other avenue through which economic incentives may have a bearing on animal
welfare outcomes is through consumer preferences — an issue explored in
chapter 6.
4.6
Impacts on welfare of the different systems
All of the systems of intensive egg production have both advantages and
disadvantages for the welfare of the hens (as summarised using review articles and
abstract indexes in tables 4.2 and 4.4). This section starts by considering differences
in mortality rates in the different systems, and then summarises a wider range of
measures.
Mortality rates
One of the most clearly measurable indicators of hen welfare is the annual mortality
rate (table 4.2). Rates are typically higher in alternative housing systems than
battery cages.
However, mortality rates have to be carefully interpreted. There are two welfare
implications associated with mortality rates:
•
even if death involves no suffering, low mortality rates imply a later death,
which is generally preferred to an earlier one; and
•
death may be associated with suffering. There are two modes of death with
associated time periods for hens. First, from 20 to 72 weeks a hen may die from
a variety of causes, from sickness to cannibalism. These deaths will involve
suffering, at least for some hens. Second, the surviving ‘spent’ hens are removed
from cages, transported to an abattoir and slaughtered. If this involved negligible
suffering, the second time period could be largely ignored when looking at hen
welfare. However, as cited in this chapter, the process of slaughter is also likely
to contribute to the suffering of hens (for example, through fractures and fear) —
which suggests that it should be incorporated into any measure of hen welfare.
A measure which encompasses both welfare implications of mortality is the
expected life of hens. If hens lived out their natural lives, then large disparities in
annual mortality rates tend to generate significant disparities in expected lives (as
shown in column 3 in table 4.3). However, the fact that hens in both systems are
slaughtered around week 72 brings the expected lives close together. For example,
the expected life of a hen in a system with 5 per cent mortality in weeks 20 to 72 is
only 1.2 weeks greater than a hen in a system with 10 per cent mortality over the
same period. As well, the average expected life of hens is greater in a farm where
36
BATTERY EGGS
annual mortality rates are higher, but the farmer decides to run a flock for a second
production year (column 4 in table 4.3), compared to a farm with one year of
production and low mortality rates. Thus, disparities in mortality rates up to week
72 may tend to exaggerate the real differences in the welfare of hens in different
systems.
ANIMAL WELFARE
ISSUES
37
Table 4.2
Period
Mortality rates in hens in different housing systemsa
Cage
Barn, Perchery,
aviary
Free range
20-72 weeks
5
5
8
Appleby et al 1992, p. 76
n.a.
20-72 weeks
..
Low mortality rates,
comparable to
b
battery systems
..
Advice from Victorian and NSW
RSPCA representatives for their
accredited barn-lay farms
Commercial farms
in Victoria and
NSW
20-72 weeks
5.6
10.8
..
Barnett 1998 (experimental data)
Experimental
20-72 weeks
5.4
4.6
..
Keeling 1989 (cited in ANZFAS
1994)
..
20-44 weeks
2.5
1.4
..
McLean, Baxter and Michie (cited
in ANZFAS 1994)
..
20-60 weeks
2.6
3.8
..
Ehlhardt, Donkers and Gerritsen
1989 (cited in ANZFAS 1994)
Experimental
21-72 weeks
5.8
8.5
..
Rauch (1989) (cited in ANZFAS
1994)
..
20-72 weeks
5.2
8
..
Amgarten and Meierhans (1992)
Commercial farms
20-72 weeks
..
2.8 to 4.6
..
SEG Advisory Service, Zurich,
(cited in Swiss Society for the
Protection of Animals STS 1994)
Commercial farms
in Switzerland
20-72 weeks
..
2.6
..
Strasser 1992 (cited in Swiss
Society for the Protection of
Animals STS 1994)
Commercial farms
in Switzerland
Higher than battery
cages by 2.4%
..
Morgenstern and Lobsiger (1993)
Commercial farms
in Switzerland
14
..
..
Carter (1989)
Commercial farms
in the US
18-70 weeks
4 to 5
..
10-12
Jordan and Pattinson (1996)
Commercial farms
in the US
16-76 weeks
6
..
..
Judgement of Justice Bell (1997)
UK Commercial
farms
Batch length
of 60 to 72
weeks
8
15 - 33
8-10 up to
25
NSW Farmers’ Association (sub.
c
78)
Australian
commercial farm
5-10
2.9-5.7
2.6-3.9
Macindoe (1987, p. 131)
UK experimental
farms
8.5
6.8
..
von Horne (1997)
Commercial farms
in the Netherlands
5-10
12-19
..
Information provided to the
Commission from a number of
poultry farms
Commercial
Australian farms
..
Taylor and Hurnik (1996)
Experimental
20-72 weeks
Over a flock
life of 440
days
20 - 72 weeks
410 days
20 to 72
weeks
19-168 weeks
Mortality the same across aviary
and cage systems.
Source
Type of data
a Mortality rates are expressed as a percentage of birds initially housed which die over the period concerned.
b A 1% mortality rate per month is the maximum acceptable, and a 1% rate must trigger diagnostic and
corrective action (RSPCA 1998).
c Mortality rates for barn-lay and free-range are based on a 60 week batch length, whereas that for battery
caged hens is 72 weeks.
38
BATTERY EGGS
Table 4.3
Expected life of hens with different annual mortality rates
Annual mortality rate
20 to 72 weeks
Expected life with
slaughter at 72 weeks
Expected life with no
forced slaughter
Expected life with 2
years of production
Weeks
70.7
69.5
68.2
66.9
65.6
Weeks
185.9
178.3
170.8
150.5
124.5
Weeks
115.0
111.4
107.7
103.4
98.2
Proportion
0.05
0.10
0.15
0.20
0.25
Source: Appendix F.
Other welfare measures
A significant scientific literature has developed on the performance of different
housing systems, covering a wide variety of indicators. However, it is sometimes
difficult to compare results from one paper with another due to differences between:
•
the breeds of hens used;
•
the exact nature of the housing system (eg aviary compared to deep litter);
•
whether hens were beak trimmed or not;
•
the length of the experimental period, and the number of hens observed; and
•
other aspects of the experimental design.
The standard and scope of analysis also vary considerably, making it difficult to
make assessments. In producing the summary in table 4.4, the Commission has
emphasised objective primary research.
Disadvantages of non-battery alternatives
The more rigorous studies suggest that the main animal welfare disadvantages of
non-battery systems relative to cages are:
•
mortality rates in non-battery alternatives appear to be typically higher than in
cages. The higher rates reflect a greater incidence of cannibalism and sickness in
non-battery systems. However, some barn-lay farms reported mortality rates
which were lower than the best achieved in battery cages (table 4.2). Mortality
rates can be low if appropriate husbandry techniques are used — regardless of
the system. Moreover, as noted above, the elevated mortality rates in non-battery
systems should be put into perspective. Hens from all intensive production
systems are typically slaughtered at 72 weeks.
ANIMAL WELFARE
ISSUES
39
Table 4.4
Aspects of animal welfare in battery cage and barn-lay systems
Indicators
Battery
Barn-Lay
Mortality rate
5 to 6 per cent per year.
Estimates vary considerably, but tend to
be somewhat higher than in cage
systems. Commercial barn systems in
Australia average around 10 to 15 per
cent per year (Advice from Greg
Parkinson; also see table 4.2).
Cannibalism
Less likely than in barn-lay or free-range More likely the higher the stocking rate,
and much more likely in the absence of
due to small size of groups in cages
beak trimming (Temple 1994, p. 49). Also
(Temple 1994, p. 31).
see Morgenstern and Lobsiger (1993).
Predation
Not a problem.
Not a problem, but can be a problem in
systems (eg free-range) which allow
outside access.
Sickness
Infectious diseases lower than in
alternatives, but non-infectious metabolic
and skeletal problems are greater
(Appleby et al 1992, pp. 46-47).
The Swiss data reported by Morgenstern
and Lobsiger (1993) point to higher
sickness rates, but the Swiss system is
based on small farms where prophylactic
treatment can be sub-optimal. Barnett
and Newman (1997) note higher coccidial
and other infections.
Fracture rate in birds
Lack of regular movement decreases
bone strength — but not clear that
strength is reduced in cage systems
(Temple 1994, p. 32). 29% of birds have
fractures at the end of their life, some of
them probably sustained during removal
from the cages (Barnett & Newman 1997,
p. 392). ANZFAS (1994, p. 23) cites
evidence that around half of cage bird
breaks occur prior to removal from cages.
14% per cent of free-range birds have
fractures at the end of their lives —
probably a good proxy for barn-lay hens
(Barnett & Newman 1997). Gregory et al
(1990) found 10% of perchery birds had
fractures (cf 24% of caged birds). Early
fractures appear to be higher in
percheries (evidence cited by ANZFAS
1994, p. 24). Newman and Leeson (1998)
find stronger bones in hens kept in
aviaries compared to cages.
Foot problems
Claw length too great in some birds.
Can get foot damage with wet litter or
badly designed perches (Duncan,
Appleby and Hughes 1992) and Temple
(1994, p. 49). Bumble foot and keel bone
lesions occur in systems with perches
(Abrahamsson 1998) and Morgenstern
and Lobsiger (1993).
Physical indicators
Abrasive strips in cages eliminate claw
length problems (Temple 1994, p. 28).
Toe pad hyperkeratosis occurs in cage
hens (Abrahamsson 1998).
Feather pecking
40
BATTERY EGGS
A major source of feather loss, not
necessarily reduced by beak trimming
(Temple 1994, p. 28ff). Tanaka and
Hurnik (1991) found 4.1 per cent of
caged birds were affected in a two week
observation period cf less than 0.1 per
cent in aviaries.
Less than in battery cages (Temple 1994,
p. 28ff) and partly reduced by beak
trimming and good foraging possibilities.
Table 4.4
Continued
Indicators
Battery
Barn-Lay
Stress hormone presence
Barnett (1998) records 0.46 nmo1/L of
corticosterone in a cage system with two
birds per cage and a space allowance of
2
752 cm per bird (a space allocation
much higher than the average in
commercial cages).
Barnett (1998) records 1.54 nmo1/L of
corticosterone in a barn system with 7
birds per square metre and flock sizes of
900 hens. This higher level suggests
greater stress levels in barn systems —
but note the data are experimental and the
control cage group is not representative of
commercial cages. Koelkebek and Cain
(1984) have also shown lower
concentrations of corticosterone in cages
than in floor pens. However, Gibson et al
(1986) found lower corticosterone levels
in yards than cages.
Egg production rate per bird
Around 290 to 300 per year per hen at
point of lay.
Around 250 eggs per year per hen at
point of lay (advice from Greg Parkinson).
Macindoe (1987, pp. 127-128) found egg
production rates to be roughly equal
between battery systems and alternatives.
Bird weight
Higher than in barn-lay systems.
Beak-trimming (de-beaking)
Customary, but probably not necessary in
all breeds with good lighting control.
Trimming greatly impairs birds’ sensory
abilities (Appleby et al 1992, p. 14;
Temple 1994, pp. 25-27).
Customary and probably necessary in
current systems to reduce risks of
cannibalism and feather pecking. The
Swedish have deferred a ban on the
battery caged system because the animal
welfare implications of a non-battery
alternativewithout trimming were so poor.
Dry litter
No litter (wire floor).
Litter available for pecking and bathing,
but it can get wet with parasite and
bacterial problems. Design of the barn
system may overcome these problems.
Lighting
Strong control through artificial lighting.
Sunlight in some systems, but note that
light control can be used to moderate
aggression.
Temperature control
Very good in new, moderate in old.
Moderate. Environmental temperature
control on par with new battery cages
systems is not economically feasible in
barns with low stocking rates because of
lack of bird mass as a source of heat.
Dust control
Probably better than alternatives.
Temple (1994, p. 49) and Appleby et al
(1992, p. 46) report higher levels (with
some problems for hens and humans).
However, automatic egg collection can
reduce human contact with dust.
Housing quality factors
ANIMAL WELFARE
ISSUES
41
Table 4.4
Continued
Indicators
Battery
Barn-Lay
Ammonia control
As above.
As above, but some new methods may
reduce the problem (Barnett and Newman
1997).
Food quality and access
Excellent.
Some large-group systems may need
careful management to guarantee access
for all animals (Temple 1994, p.24).
Water quality and access
Excellent.
As above.
Shelter from rain and sun
No problem.
No problem.
Faeces control
Excellent.
Contamination of birds by other birds’
droppings can occur (Temple 1994,
p. 54), but this is dependent on the
design of the system. It does not occur in
systems without multi-tiers — which
dominate in Australia.
Behavioural indicators
Dust-bathing
Scope for dust-bathing.
Not possible. Dawkins (1987) suggests
that hens place low value on dust-bathing,
but more recent experiments by Mathew
et al (1993) suggest otherwise.
Perching
Not possible.
Nesting
Not possible, but summarised as a highly Nesting is possible.
desirable feature of housing by Temple
(1994, p. 41). Hens appear to be
frustrated if prevented from nesting, and
will pay a high price to gain access to
nesting boxes (Hughes et al 1989).
Wing stretching
Temple (1994, p. 37) suggests allowance Possible.
for walking and wing and leg movements
2
require around 1000 to 1500 cm per hen
(well over the current allowance of 450
2
cm )
Pecking in litter
Not possible.
Possible.
Ability to exercise
Very limited.
Possible.
Social interaction
Stable social order of small group.
Tend to be large groups and some
instability. Individual recognition seems to
be limited to flocks of up to about 100
birds (Hemsworth and Barnett 1993, p.
104). Larger flocks lead to pecking order
violations.
Sun-bathing
Not possible.
Not possible, except if a sunny area is
incorporated as part of the design, or if
outside access is facilitated (as in freerange).
42
BATTERY EGGS
Possible.
Table 4.4
Continued
Indicators
Battery
Barn-Lay
Expressions of fear with humans
Birds have less familiarity (particularly
those in upper tier cages) which
increases fear. Collection of hens at the
end of lay probably increases fear.
More familiarity.
Comfort behaviours
Stereotyped and vacuum behaviours
Birds in aviaries perform comfort
behaviours more commonly (roughly 5
times more frequently), suggesting
greater levels of comfort (Tanaka and
Hurnik 1992).
Vacuum dust-bathing is higher in cage
systems. Tanaka and Hurnik (1992)
found 7 to 24 per cent of caged birds
engaged in stereotyped behaviours,
compared to 1 to 2.7 per cent in an aviary
system.
Other
Propensity for good husbandry eg how Easier inspection in old vs. new systems. Large flocks tend to be harder to inspect.
easy is inspection?
Cages in high or low tiers can be harder
to examine.
Variations between establishments and Probably more consistent quality.
across flocks
Husbandry probably requires greater skill
(Appleby et al 1992, p. 73).
•
egg production rates appear to be lower in non-battery systems — which some
see as an indicator of the biological ‘fitness’ of hens. On the other hand,
Dawkins (1980) disputes that productivity is a good measure, by itself, of animal
welfare. Similarly, Pearson (1983) notes that birds with severe foot damage had
unaffected egg productivity — suggesting that egg production per bird is, by
itself, only a partial measure of animal welfare. The AEIA (sub. 76, p. 13)
acknowledges that “It is true that unhappy hens do lay eggs.”
•
barn-lay systems, the most likely replacement for battery cages, may introduce
respiratory problems for hens (and possibly some humans — see chapter 7)
because of higher dust and ammonia levels;
•
temperature control is still fairly rudimentary in barn systems compared to the
environmentally controlled battery cage sheds — though this may have bigger
adverse impacts on egg productivity and feedstock conversion rates than on
animal welfare; and
•
it appears that to achieve a given standard of physical welfare in hens, greater
husbandry skills are required for non-battery systems compared to battery
ANIMAL WELFARE
ISSUES
43
systems. This may have implications for guidelines, extension services and
welfare enforcement if battery production were abolished.
Advantages of non-battery alternatives
The advantages of non-battery systems hinge on the ability of hens to exercise and
perform certain behaviours, and the value to animal welfare from expressing such
behaviours. Non-battery alternatives allow hens the full capacity to dust-bathe,
perch, nest, wing stretch, peck in litter and exercise. These are normal behaviours of
hens, but how important to welfare are they?
One way of trying to find out what a hen ‘needs’ is to observe its behaviour when it
is in a restricted environment. Two general responses occur. The animal may still
try to perform certain normal behaviours despite the absence of all the necessary
conditions — so-called ‘vacuum’ behaviour. Thus, a bird may act as if it is dustbathing in a wire floored battery cage, notwithstanding the obvious absence of dust.
A second response is displacement activity, whereby a hen will perform alternative
actions.
The presence of displacement and vacuum behaviours is seen by some to reveal
what needs are important to hens. Other evidence is the behaviour of birds when a
constraint is removed. For example, birds released from battery cages tend to show
increased wing flapping and stretching (Nicol 1987). However, it is not clear that all
vacuum or displacement activity reveals lower animal welfare. For example, some
dogs will turn in circles on a sitting room carpet before sitting down. This is likely
to be a vacuum behaviour; in their natural state animals will engage in such
behaviour to level the grass for more comfortable sitting (Dawkins 1980). Most
would not see this as an indication that the dog is suffering.
One way of overcoming people’s subjective interpretation of animal behaviour and
the risk of anthropomorphism (assuming that animal behaviour can be interpreted by
analogy to human biological and cultural experiences), is to conduct experiments
which reveal the preferences of animals themselves. Anthropomorphism can lead to
both poorer animal welfare outcomes and higher costs of production (box 4.5).
Dawkins (1983, 1987, 1990) and others have shown how animals will work for
changes in their environment, or will give up food or space in order to obtain other
environmental features. Dawkins (1987) found that hens were not willing to work
very hard for litter, but in a more elaborate experiment, Mathew et al (1993) found
that hens do appear to value litter highly. Faure and Lagadic (1989) show that hens
44
BATTERY EGGS
are willing to work for greater space in cages.9 Duncan and Kite (1987) have found
that hens are willing to pay a high ‘price’ for nesting boxes, while Smith et al
(1990) also demonstrate that hens display a high motivation to nest.
Box 4.5
The Brambell floor
The Brambell Committee strongly recommended that the floors of battery cages
should be made of a heavy rectangular mesh instead of the fine hexagonal mesh in
use at the time. The Committee thought that standing on the fine mesh was
uncomfortable for the birds. The new mesh, however, increased the number of broken
eggs, and would have pushed up production costs had it been adopted. More
problematically, the hens themselves voted with their feet — for the old system.
Two animal experimenters, Hughes and Black, found that hens which could
voluntarily choose between the two floors, spent much more time on the fine rather
than the heavy mesh. Photographs showed that the hens’ feet appeared to be better
supported by the fine mesh, explaining their preference.
Source: Dawkins (1980).
On the other hand, some commentators say that hens are unlikely to suffer from
space restrictions or the absence of nesting boxes and dust-bathing in cages because
they ‘never knew anything different’. However, Cooper and Appleby (1995) find no
differences in the motivation to use nests between hens experienced or
inexperienced with nests. This suggests that nesting-box ‘needs’ may be basic for
hens.
Much of the literature on hen behaviour suggests that dust-bathing, nesting and
perching are important behaviours for hens, and that a production system that does
not allow their appropriate expression is flawed. Hens in non-modified cages cannot
complete any of these behaviours to a satisfactory extent. The RSPCA and a range
of other animal welfare groups all oppose battery cage systems on the basis of these
behavioural restrictions.
The confinement of birds in relatively small cages has also attracted considerable
criticism from some members of the general public in Australia and elsewhere for
many years. In this study, the Commission received around 70 submissions from
individuals expressing their concern about what they perceived as the suffering
endured by hens kept in a cage environment and supporting the proposed ACT ban.
Extracts from some of these submissions are set out in box 4.6.
9 Though note that Hemsworth and Barnett (1993, pp. 102–103) find no systematic evidence that
confinement adversely affects corticosterone levels in hens, an indicator of ‘stress’, though this
may be a misleading indicator of welfare (Temple 1994, p. 14).
ANIMAL WELFARE
ISSUES
45
Box 4.6
Extracts from submissions supporting the ACT ban
Any community would benefit if the practice of battery hens was outlawed. There is an
alternative. (J. Fairleigh, Eleebana, NSW)
It is my heartfelt wish that you will ban battery hens. Hens need to be in the open to
scratch, flap their wings and enjoy fresh air and sunshine. (E. Smith, East Bentleigh,
Vic)
I consider the keeping of fowls in battery cages the cruelest thing I have seen. To
force a bird to stand in one place with not even enough space to open its wings must
be considered extremely cruel. (B. Jordan, Fern Bay, NSW)
It has become abundantly clear through media attention and through information from
community groups that the conditions under which egg producing hens are kept have
to be described as appalling. ... Ordinary citizens keeping animals under such
conditions would be accused of cruelty to animals. (P. & G. Lynga, Duffy, ACT)
I would like to voice my disgust and sorrow for the plight of the “Battery Hen”. Please
stop this cruelty and these money grubbing people taking advantage of these
animals. (T. Elwis, Argenton, NSW)
I implore you to please consider absolutely banning as soon as possible, the method
of battery egg production in the ACT. This cruel, barbaric practice is beyond
comprehension and surely it is up to Canberra/ACT to set an example to every other
state. (P. McEwen, Croudace Bay, NSW)
The prime consideration to make the barbarian Battery Cage system unlawful is
animal welfare; it is an extremely cruel system to produce eggs by such means.
(A. Herlihy, Kalamunda, WA)
More humane alternatives to battery egg production must be implemented to better
address the welfare of hens, provide consumers with higher quality eggs, and also
help provide more jobs. (D. Ogilvie, Box Hill, Vic)
Battery farms should be banned in all Australian States, not just ACT. (M. Shannon,
Waratah West, NSW)
I would like to see the ACT lead the way to eliminate animal cruelty by way of Battery
hens. (I. Ball, Birmingham Gardens, NSW)
Source: Submissions.
Animal scientists consistently report major drawbacks for hens in existing battery
cages (box 4.7) — but also see problems in alternative housing systems. For
example, the UK Farm Animal Welfare Council (1997, pp. 22–23) recommended
the phasing out of battery cages in the UK, but subject to the control of aggressive
pecking and cannibalism in alternatives.
Similarly, the EU Scientific Veterinary Committee (1996, p. 104) noted that:
46
BATTERY EGGS
At present there is no ideal commercial system for laying hens from a welfare point of
view. Further development is necessary in all systems, but enriched cages and well
designed non-cage systems have already been shown to have a number of welfare
advantages over battery cages in their present form.
On the other hand, the Australian Working Group of the National Layer Hen
Housing Review (1994) — which comprised industry, animal welfare, government
and scientific stakeholders — argued that alternative systems for the husbandry of
layer hens provided for physical welfare no better than do cage systems.
Consequently, the Working Group (p. b) recommended:
... that no attempt be made to ban or to phase out layer cage systems for egg production
in Australia until research work conducted both in Australia and overseas shows that
alternative systems provide a demonstrable welfare advantage which is not offset by
increases in disease prevalence, in the increased use of medication or by working
conditions for stockhandlers which are poorer than those operating for caged housing.
In all of these appraisals there is a common undercurrent of support for continued
scientific research to manage some of the key deficits of alternative systems.
Prospects for improvement over time
A pertinent question is the extent to which the deficiencies noted by many
commentators in all housing systems can be changed over time. Significant
improvements in animal welfare (for example, reductions in mortality rates) have
been achieved in battery systems over the last twenty years. For example, Appleby
et al (1992, p. 25) indicate that about 12 per cent of hens would have died per year
in a well-run laying system in the 1970s, while this is as low as 2 to 3 per cent in the
1990s.
Battery cage systems — unless modified to include perches, nesting boxes, and
litter — cannot meet some of the behavioural requirements identified as important.
Cage modifications are certainly possible, but they effectively represent a whole
new housing system, rather than an incremental improvement in the existing system.
Nor are there good prospects for future significant reductions in the (existing low)
mortality rates in battery cages.
However, in newer or less frequently used systems, such as barn-lay and free-range,
it seems likely that mortality and other aspects of animal welfare could be
significantly improved if research were oriented towards these systems.
ANIMAL WELFARE
ISSUES
47
Box 4.7
What the scientists say about the battery system
Appleby at al (1992, p. 41) suggest that there are several adverse features of the
battery cage system, which tentatively, they regard as unsatisfactory for the welfare of
hens.
Temple (1994, p. 35) suggests that the scientific evidence is compelling enough to
make provision of suitable dust for bathing highly desirable. He also notes that the
case for provision of a nest site “is already very strong, as long as one accepts the
evidence for high motivation, frustration, and hence suffering”. (pp. 42–43)
Broom (1992) suggests that for hen’s welfare to be good they should have adequate
exercise, access to nesting boxes, and the ability to peck and dust-bathe.
Baxter (1994, p. 618) argues that “three lines of evidence point to suffering on a
continuous and repeated basis throughout the hens’ confinement in a cage”.
The Scientific Veterinary Committee of the European Commission (1996, p. 103)
noted that: “current battery cage systems provide a barren environment for the birds.
Birds are for instance not able to show all normal movements, to obtain adequate
exercise to prevent bone weakness, or to lay eggs in a nest. A better system for
housing hens is clearly needed.”
The Commission spoke with a number of Australian scientists working in layer hen
research — all acknowledged significant drawbacks to animal welfare from the battery
cage system. On the other hand, they all also saw some drawbacks in alternative
systems.
Barnett (1998) notes that:
It must also be recognised that since the barn hen sector of the egg industry is in its early
stages of development in Australia, there is an expectation that, given additional
research and industry experience, both the level of production and bird health will be
equivalent to that achieved in cage systems. This expectation is based on the results
being achieved overseas and local experience.
Even in Europe, where commercial production in barn systems has a longer
heritage, there is an expectation of future gains (EU Scientific Veterinary
Committee 1996, pp. 105ff and the UK Farm Animal Welfare Council 1997, pp
15 –16).
Because of the significant prospects for future improvements, using existing data on
mortality, cannibalism and other animal welfare indicators may provide a biased
indicator of the ultimate welfare standard achievable. For example, new breeds
(Craig and Muir 1996, Muir 1996, Barnett and Newman 1997, ANZFAS 1994,
p. 17), different diets (Ambrosen and Petersen 1997) and a number of other
48
BATTERY EGGS
strategies may reduce cannibalism and reduce the need or severity of partial beak
removal.
The manipulation of many variables — such as barn-lay design, litter types,
stocking rates, pens sizes, hen breeds used, selective breeding out of aggressive
traits, feed types and additives, lighting control, husbandry practices, chemical
treatment and inoculation strategies, temperature control and ventilation — offer
greater scope for improvement of hen welfare in these production systems than they
do in the battery cage system.
What is not known
While there has been a huge amount of research on the welfare of hens in different
contexts, some researchers point to the inadequacy of information in some
important areas. For instance, Barnett and Newman (1997, p. 396), in a recent
review article, indicate the urgent need for further replicated experiments of the
welfare impacts of non-cage systems and for more data on productivity and
mortality if producers are to be encouraged to use these alternative housing systems.
They also point to a need to check whether practices and designs used effectively
overseas function well in Australia.
4.7
Non-scientific aspects of animal welfare
So far, the Commission has examined scientific evidence about the nature and
measures of animal welfare in different production systems. The analysis has
proceeded on the basis that welfare is a characteristic of an animal which can be
assessed objectively without moral judgements (Broom 1991, p. 4168). However,
judgements of animal welfare in different systems are often affected by emotional
and moral considerations. In some cases, this can lead to poor use of evidence about
the relative impacts of different systems on animal welfare (as noted by Dawkins
1980). In other cases, moral considerations are appropriate when judgements are
being made about what constitutes an unacceptable level of animal welfare, such as
when treatment is deemed cruel. These issues are examined in the next two subsections.
What is not good evidence of poor animal welfare?
Animal welfare is an emotive issue. As such, people who are horrified by one-off
examples of adverse welfare outcomes may incorrectly deduce that these outcomes
ANIMAL WELFARE
ISSUES
49
are somehow typical of the everyday outcomes for hens in a given production
system. For example:
•
even an expert farmer will have bad outcomes for some hens, regardless of the
system. On average, a poultry farmer with a (good) 5 per cent annual mortality
rate in a stock of 250 000 birds will be removing about 35 dead birds a day.
Some birds will suffer de-feathering. Some will be subject to cannibalism.
•
in a farm with poor husbandry practices, sick birds will be left untreated and
some dead birds will rot in the cages, in the barn or on free-range pastures.
None of these outcomes are good evidence of the deficiencies of a farming method
as whole, unless they are endemic and at high levels — neither of which is true for
any of the commercially used systems. Thus, arguing from particular instances of
poor outcomes or neglect is not relevant to the objective evaluation of the merits of
different egg production systems.
The issue of cruelty
Some people argue that it is cruel to keep hens in battery cage systems (for example,
subs. 26, 43, 46, 57, 87 and 103). Cruelty is a threshold question for valuing
different states of animal welfare. If it could be established that the broad
community regarded battery egg production as cruel, it would suggest a ban.
In this context, cruelty is not just a low level of animal welfare, but one which falls
below what the community as a whole would generally regard as acceptable. For
example, most people would regard a person beating a dog with a metal chain as
unambiguously cruel. However, a simple example like this belies the complexity
and subtlety of the concept of cruelty.
First, suffering is a vital element in cruelty, but it is hard to assess in animals and
may tend to be de-emphasised through lack of ready measurement. Suffering
extends beyond physical pain to the mental experiences of an animal. It is not clear
that every aspect of suffering is manifested in physical responses (eg stress
hormones).
Second, it appears that context matters for cruelty:
•
50
People are less likely to perceive acts as cruel if the act is incidental to some
other purpose. Cruelty is seen, for example, as much worse if it done needlessly,
for the ‘pleasure’ of the perpetrator.
BATTERY EGGS
•
People’s standards for cruelty to animals may vary depending on the extent to
which the animal’s appearance or nature arouses human sympathy (for example,
a baby seal compared to a rat — see Dawkins 1980, p. 8). Standards may also
vary over time and across cultures.
•
Restrictions on the ability of an animal to behave as it would in the wild may
sometimes be viewed as cruel, even if it does not subjectively ‘hurt’ the animal.
For example, some people would perceive it as cruel to keep an eagle in a zoo,
even if it appeared contented, because it was unable to fly properly. On the other
hand, denying what people perceive as an ‘adverse’ natural trait of an animal
(such as pack hunting in dogs) will probably not be seen as cruel.
•
Many people deem it cruel not to put down an animal which is suffering from a
debilitating disease or neglect, but they may feel very uneasy about acquiescence
to voluntary human euthanasia in similar circumstances (Dawkins 1980, p. 6).
These complexities and inconsistencies make it difficult to be unequivocal about
whether battery cage production is cruel or not. People viewing the same facts will
make different judgements. The Commission reviews some of the consumer
perceptions of animal welfare in chapter 6, but does not make its own judgement on
this inherently subjective issue.
However, the case for a ban does not rest on proving cruelty. The case can also be
put for a ban if it is felt that the shift from battery to non-battery alternatives would
raise animal welfare sufficiently to be worth the cost of doing so.
4.8
Conclusion
Different housing systems for hens have a variety of subtle and complex influences
on the physical and behavioural aspects of animal welfare, which make it hard to
form judgments about which is best. Animal welfare itself has multiple dimensions,
such as food and water intake, illness and behavioural freedoms.
There are a variety of scientific ways of discerning whether a particular change in
any single aspect of a hen’s environment will improve or reduce welfare (Broom
1991). As a result, there is substantial (but not complete) agreement about what
constitutes a better welfare outcome, taking each dimension separately. For
example, all other things being equal, most scientists would agree that animal
preference tests show that a hen with access to a nesting box is better off than one
without such access.
ANIMAL WELFARE
ISSUES
51
There is reasonable (though weaker) evidence about the comparative performance
of barn versus battery cage systems in each of the relevant dimensions (tables 4.2
and 4.4), albeit with some gaps and uncertainties (such as in corticosterone levels).
Drawing on the international and Australian studies and on information provided by
participants in this study, it is apparent that all intensive commercial systems —
battery, barn or free-range — present a number of problems in some important
dimensions of animal welfare.
Battery cages allow limited potential for exercise and the pursuit of behaviours,
such as nesting, dust-bathing and perching. Experimental studies reveal that hens
value these highly. In contrast, barn-lay (and free-range) systems allow for the full
expression of such behaviours. The incidence of fracture rates and feather pecking
also appears to be higher in battery cages compared to alternatives. On the other
hand, a range of physical indicators (such as mortality, sickness and egg
productivity) and housing quality factors (such as temperature and dust control)
appear to currently favour battery cages over alternatives.
The view about which system is best for hen welfare overall (rather than along any
particular dimension) depends on the weights allocated to each dimension of
welfare. Unfortunately, while laboratory preference tests can be used to see how
animals trade-off some aspects of welfare for others (such as access to food with
nesting boxes), they cannot be used to trade-off all aspects of welfare. For example,
a revealed preference test cannot measure what behavioural freedoms a hen is
willing to give up to lower the risk of mortality. Consequently, there is no simple
measuring stick for overall animal welfare. Some people may think that the lower
expected lifespan (and other disadvantages) in barn systems is too high a price to
pay for the greater scope for exercise and behavioural freedoms offered by these
systems. Others may see this as an acceptable price to pay.
It is important to distinguish the situation as it is now (as above) from what it is
likely to be in the future. There are a number of relevant findings from the scientific
research about the potential for achieving better hen welfare outcomes from each of
the systems:
•
52
Battery cages: While physical outcomes are already generally good, there is
limited scope, without radical re-design, for changing the existing battery cage
system to overcome its chief deficits. Radical re-design (which is discussed
further in chapter 8) — such as modification of cages to incorporate facilities for
nesting, dust-bathing, litter pecking and perches — would enhance hen welfare
compared to current cages. Such modifications, however, effectively represent a
whole new housing system and have not been trialed commercially.
BATTERY EGGS
•
Barn systems: There are good prospects that research and learning about how to
manage barn systems will improve the physical welfare outcomes for hens in
these systems, such that they compare well with cages (Barnett 1998). For
instance, further research may identify better housing designs or hen breeds to
limit aggressive interactions.
The Commission’s reading of the complex literature suggests that, on balance, the
move to a properly managed barn system would provide some improvement in hen
welfare, especially in the long run. However, a ban, which accelerates the shift, may
require accompanying measures to maximise the potential for achieving welfare
gains in the short term:
•
research (coordinated by government on public good grounds) into the best
strategies for control of disease and aggressive pecking;
•
extension services to relevant poultry farmers to disseminate these findings;
•
development of codes of practice by industry, government and animal welfare
groups for the alternative systems to maximise their welfare potential, while still
making them economic;
•
appropriate monitoring of farms and enforcement of agreed standards by
government; and
•
appropriate training in the new systems for staff, including the modification of
existing husbandry courses in educational institutions. This recognises that a key
ingredient in animal welfare is not related to the housing system at all, but to the
professionalism of the poultry farmer.
It should be noted that, in national terms, an ACT ban will not change the absolute
market share held by barn systems substantially. In that sense, concerns that large
numbers of operators unfamiliar with barn systems would suddenly commence
production, with all the animal welfare costs that inexperienced husbandry can
produce, are unlikely to be realised.
Finally, animal welfare is only one ingredient in the overall assessment of the
proposed ban. Any number of changes could be proposed which would improve
animal welfare, but only some of them will be cost-effective or acceptable to the
community. The next two chapters examine the cost implications of the proposed
ban.
ANIMAL WELFARE
ISSUES
53
5
Impacts on producers and jobs
5.1
Industry structure
Introduction
Egg production is one of the oldest forms of Australian agriculture. Production was
from backyard and mixed farm flocks until the 1930s, when larger commercial
flocks were established based on enclosed sheds or ‘barns’.
Following their development in the US in the 1930s, intensive battery cage
production systems were introduced to Australia during the 1950s, spreading
throughout the industry during the 1960’s and subsequently. The new production
technology offered advantages in the form of higher hen productivity, lower labour
requirements and the avoidance of some diseases associated with straw litter floors.
Around this time, the poultry industry also separated into specialist egg and broiler
producing units.
Beginning in the 1970s, and developing momentum through the 1980s, some
consumers developed a preference for free-range eggs. These preferences appear to
have reflected both animal welfare concerns about birds kept in a caged
environment and a perception that free-range eggs were more nutritious and
chemical-free. As a result, some exclusively free-range producers entered the
industry and some major battery cage producers developed a free-range capacity.
More recently, there has been a return to barn production. This meets consumers’
welfare concerns about the cage system at lower production costs and consumer
prices than free-range production. Considerable impetus was given to the
development of barn production by the entry of RSPCA-endorsed eggs.1
For many years, prices and production in the egg industry were highly regulated by
statutory egg marketing boards. As a consequence, the industry benefited from high
effective rates of assistance — in excess of 250 per cent in the early 1980s
1
The criteria for RSPCA endorsement effectively rule out eggs produced in battery cage systems.
To date, only barn produced eggs have satisfied the RSPCA criteria.
IMPACTS ON
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53
(IC 1995, p.112). Regulatory controls were largely abolished through the 1980’s
with the exception of Western Australia, Queensland and Tasmania (Larkin,
Heilbron and Murphy 1997). Effective rates of assistance for the industry are now
of the order of 6 per cent (IC 1997).
Deregulation appears to have increased the pressure on producers for structural
change. By 1994, almost 40 per cent of producers in NSW who owned a quota
when the industry was deregulated in 1989 had ceased production. And only 9 per
cent of egg farmers that restructured their operations increased production and
market share (Littleton and Davies 1994, p. 209). It needs to be noted, however, that
deregulation occurred against a backdrop of generally declining per capita egg
consumption (chapter 6).
While barriers to entry in egg production appear small, exit from the industry in an
environment where alternative employment is not always available is more
problematic. Writing in 1994, Littleton and Davies (p. 209) commented that many
NSW egg producers are ‘still hanging on’ and eating up any capital reserves they
may have. One survey placed average capacity utilisation at 83 per cent in 1991–92
(Read Sturgess and Associates 1993).2 All in all, there seems reason to suppose that
there is still a degree of excess capacity in the industry, but there is no readily
available measure of its extent.
Farm size and location3
Over time, the two most notable trends in the industry have been the increasing size
of egg farms and its mirror image, the decreasing number of producers in the
industry. In NSW, for example, the number of egg producing farms fell from 3 000
in 1950 to 144 in 1996. The average number of hens per farm increased from 6 000
in 1970 to 20 000 in 1991.
At March 1996, there was a total of 526 egg producers in Australia. About 27 per
cent of these farms were in NSW and about 22 per cent in Victoria. NSW had
almost 39 per cent of the national flock and Victoria 23 per cent (table 5.1).
2 However, the authors point out that 1991–92 may not be representative as it was a particularly
depressed year for the industry.
3 This section of the report draws extensively on Larkin, Heilbron and Murphy (1997) and Larkin
(1993).
54
BATTERY EGGS
Table 5.1
Number of farms and egg producing birds, March 1996 a
Number of birds (millions)
New South Wales
Victoria
Queensland
South Australia
Western Australia
Tasmania
Northern Territory
Australian Capital Territory
TOTAL
5.1
3.0
2.6
0.8
1.3
0.3
0.1
0.2
13.4
Number of farmsb
144
118
110
47
85
14
6
2
526
(201)
(170)
(99)
(164)
(109)
23)
(8)
(2)
(774)
aTotals may not sum due to rounding.bNumbers without parentheses are farms whose main business is egg
production. Numbers in parentheses include producers for whom egg production is not necessarily the main
business of the enterprise.
Source: Larkin, et al 1997.
Most farms are located near the major markets, generally within a radius of 50 to
100 kilometres of State capital cities. This reflects the relatively small quantity of
agricultural land needed for egg production and the advantages of relatively short
transport legs for a fragile commodity. However, some significant producers are
located in grain belt areas such as the Darling Downs in Queensland and Tamworth,
Young and Griffith in NSW. There is also some decentralised production in
Victoria, Tasmania and South Australia.
Selective breeding has dramatically increased bird productivity with the number of
eggs per bird per year increasing from about 180 in 1970 to approximately 300
today. Increased output per bird has led to a corresponding improvement in bird
feed conversion rates: in 1997, one kilogram of eggs required 3.5 kilograms of feed,
while in 1991 it required only 2.9 kilograms of feed.
Farm gate prices and returns
From 1987–88 to 1994–95, egg prices at the farm gate exhibited a slight downward
trend. After a period of recovery to 1996–97, prices fell again in 1997–98 (figure
5.1). Across the entire period, farm gate prices have been flat — the Australian
Bureau of Agricultural and Resource Economics (ABARE) index averages
approximately 100 over the period shown. Earlier ABARE egg price data show this
flat trend extending back to the early 1980s (ABARE 1997). By contrast, price
indicators for some of the industry’s main inputs (wheat and wages) and the implicit
price deflator for non-farm GDP show an upward trend (figure 5.1).
IMPACTS ON
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55
Figure 5.1
Egg output prices and main input price indicators, 1987–88 to
1997–98
1987–88=100
Index points
150
130
110
90
Egg prices
Wheat prices
Labour costs
Implicit price deflator
70
50
198788
198889
198990
199091
199192
199293
199394
199495
199596
199697
199798
Data sources: Egg and wheat prices are from ABARE (Australian Commodities and Australian Commodity
Statistics, various issues); labour costs are indexed average weekly total earnings, all employees (ABS Cat.
No. 6302); and the implicit price deflator (IPD) is trend IPD for gross non-farm production (ABS Cat. No.
5206).
A divergence between output and input prices — the ‘cost-price squeeze’ — is not
uncommon among Australia’s rural industries. Such a squeeze does not necessarily
mean lack of profitability, especially in the longer term. The ‘cost-price’ squeeze
can be offset by improved productivity. It is, however, indicative of pressure for
structural change and may therefore throw some light on the number of producers
that have left the industry (see above). Moreover, there are indications that, at times,
egg prices at the farm gate have been insufficient to cover full production costs. For
example, Read Sturgess (1993, p. 6) note that their survey data for 1991–92 suggest:
... many producers failed to even recoup all their non-capital costs let alone make a
return to cover capital costs and managerial skills.
56
BATTERY EGGS
Vertical links in egg production
The production of eggs can be thought of as a number of distinct stages or functions
which are broadly similar for most commercial producers:
•
the breeding, hatching and rearing of pullets;
•
the production and collection of eggs on-farm;
•
quality control, including egg cleaning and testing;
•
transport from farm-gate to distributor, wholesaler or retailer; and
•
distribution to the final consumer.
The extent of these functions undertaken by individual producers varies. Until the
emergence of large scale specialist egg producers, most farms were vertically
integrated: they grew their own feed, bred and reared their own chickens, and
produced, cleaned and packaged their own eggs. But a degree of specialisation came
with large scale production.
Currently, breeding of hens for egg production is dominated by four companies
which account for over 90 per cent of commercial production in Australia. These
companies, and some smaller operators, run approximately 25 hatcheries located
throughout Australia. After hatching, day old chicks are placed in rearing facilities
until they reach sexual maturity at 16 to 18 weeks old. These facilities may be
integrated with the chicken hatcheries, although this is not always the case.
At, or just before sexual maturity, the hens are placed in cages, barns or on freerange farms. Layer hens are normally kept on these farms until they are about 72
weeks of age. They are then disposed of as pet food or as low grade meat.
In battery cage systems, egg collection, as well as feed and water supply, is usually
automatic. In barn and free-range systems, eggs are usually collected by hand
several times a day, although automatic egg collection equipment is available for
barn production. Once collected, the eggs are visually examined for cracks and,
where necessary, given a preliminary cleaning.
The next stage, grading for size and quality, takes place on-farm for the larger, more
vertically integrated, producers. For others, grading floors are operated by egg
marketing organisations. Grading floors may grade 30 000 dozen or more eggs per
week.
Once graded, eggs are given a more thorough internal and external examination.
Regular samples are also take to check for quality indicators such as yolk colour and
albumen firmness. Eggs are then categorised as one of three qualities:
IMPACTS ON
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57
•
first quality, which are suitable for marketing as shell eggs (by far the majority
of eggs);
•
second quality, which are suitable for consumption after processing; and
•
reject eggs, which are disposed of.
The eggs are then packaged into the familiar cartons, usually holding a dozen eggs
but sometimes as few as four, or as ‘flats’ holding up to 30 eggs.
Egg cartons display a wide variety of information including the name of the
supplier, the use-by-date, recommendations for storage, content information
(including the egg size, the number of eggs in the container and the address of the
supplier) and, for non-battery eggs, indications of the production mode, such as
‘free-range’ or ‘RSPCA-endorsed’. Containers may also carry other information
required by law. A number of participants suggested that the current labelling of
some eggs is misleading (chapter 6).
The egg cartons are boxed and palletised prior to transport. Fresh shell eggs are
delivered to retailers, predominantly supermarkets, with marketing and transport
from a centralised location generally being coordinated and undertaken by
marketing organisations such as co-operatives, packers or agents. These
organisations have replaced the previous statutory marketing boards.4
In battery cage and barn production systems, there is a period of about two weeks at
the end of each production cycle before new pullets are brought in. This is to allow
for thorough cleaning and disinfecting to control for the build-up of parasites and
diseases.
Industry output and employment
National production
Egg production in Australia has two distinct components, commercial egg
production and backyard production.
Commercial egg production accounts for by far the greater portion of total
production — of the order of 90 per cent. It has declined in recent years in both
value and volume terms (figure 5.2). In 1996–97, commercial production was 177
million dozen, with a value approaching $275 million. The Australian Egg Industry
4 While not strictly part of the egg production story, fowl manure is a valuable by-product and is
usually sold as fertiliser, either direct to the public or to organic fertiliser producers.
58
BATTERY EGGS
Association (AEIA) estimates that, in shell equivalent terms, approximately 3
million dozen eggs are imported in dehydrated or other processed egg forms
(equivalent to about 2 per cent of commercial production) and 1 million dozen eggs
are exported. Backyard production — amounting to about 25 million dozen eggs a
year — accounts for the rest of the domestic supply of eggs. 5
195
190
185
180
175
170
165
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
350
300
250
200
150
100
50
0
Value
Volume and value of commercial egg production, Australia,
1983–84 to 1996–97
1984
Volume
Figure 5.2
Volume (mill. doz)
Value ($m)
Data source: Larkin, et al 1997 and ABS (Cat. No. 4306 and 7501).
ACT production
The major supplier to the ACT is Bartter Enterprises (Bartter) through its Parkwood
ACT property. According to Bartter, this property has approximately 210 000 hens
and an annual capacity of approximately 5 million dozen eggs. This is more than
adequate to meet ACT commercial demand of some 3.3 million dozen. As Bartter
supplies only about 80 per cent of the ACT market, it apparently ‘exports’
5
Estimates of backyard production vary somewhat. The ABS estimated that Australian backyard
production was 24.8 million dozen in 1996–97, or about 12 per cent of the domestic supply of
eggs (ABS 1998, Cat. 4306). The NSW Department of Agriculture and Fisheries estimates that
backyard and small scale production represent 12.5 per cent of all NSW egg production (NSW
Agriculture 1995, p. 4). The NSW Farmers’ Association notes that, while an average of 6.6 per
cent of Australian households have some backyard production, the corresponding figure for ACT
backyard production is only 2.3 per cent (sub. 78, p.13). On this basis, backyard production’s
contribution to the total ACT egg consumption is relatively insignificant — and is likely to be
around 4 per cent of the total.
IMPACTS ON
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59
substantial quantities outside the ACT — over 2 million dozen. The ACT ‘imports’
approximately 800 000 thousand dozen eggs.
Industry employment
Estimates of industry employment at the national level vary. Unpublished ABS data
show total paid labour in the poultry industry (poultry meat and eggs) as 3 734
persons in 1995–96. Based on the relative share of egg production wages, salaries
and supplements (see Larkin 1993, paragraph 5.26), this implies an egg production
labour force of approximately 2 500, a figure consistent with industry estimates
provided to the Commission. In addition to paid labour, the Commission estimates,
based on unpublished ABS data for 1994–95, an unpaid (family) labour force of
approximately 1 700.
In the ACT, 50 persons are directly employed in egg production at Parkwood
(sub. 30, p. 6). ACT employment is discussed below.
5.2
Costs of egg production
Battery cage production costs
Up to date data providing a comprehensive picture of battery cage production costs
are not available. However, Read Sturgess (1993), Hafi et al (1994) and Littleton
and Sanders (1993) provide ‘snap shots’ of battery cage production in the early
1990s. Indices of costs based on these sources are reproduced below (table 5.2).
The largest single input cost for battery egg production is feed. Most producers feed
their birds a combination of grains mixed with vitamin and colouring additives.
Freight, contract grading and packaging account for almost 25 per cent of costs. Of
this, transport is a relatively small component — of the order of 5 per cent of total
costs for graded and packed eggs — although, of course, this varies with distance
(Littleton and Sanders 1993). Labour (including what is often family labour) is also
a significant cost. Labour is needed to inspect the birds for signs of disease, to
ensure that machinery is operating properly, to clean the premises, for cleaning,
packing and dispatching eggs and, depending on the extent of forward integration,
for administration, sales and marketing. Capital costs (interest, depreciation and a
return to owners capital and management) account for approximately 20 per cent of
total costs.
60
BATTERY EGGS
Table 5.2
Relative cost of inputs for egg production in battery cage
systems
Read and Sturgess
Number of birds (‘000)
Value of operating assets
($m)
Assumed eggs per bird per
year
COSTS (%)
Feed
Labour
Cost of hens a
Freight, grading,
packaging
b
Other variable costs
Interest and other fixed
costs
c
Depreciation
Return to owners’ equity
and managementd
TOTAL COSTS
Small
farm
Medium
farm
Large
farm
Average
Littleton
and
Sanders
Hafi et al
7.5
15.0
80.0
30.0
30.0
28.3
0.439
0.840
3.828
1.651
0.950
1.070
260
260
260
260
not
known
246
32
13
7
23
32
12
7
23
32
12
9
25
32
12
7
24
41
11
13
16
39
6
12
22
3
2
3
2
3
2
3
2
1
1
2
3
8
12
8
12
7
11
8
12
6
10
6
10
100
100
100
100
100
100
a Cost of hens is net of the sale value of spent hens. b For example, rates, insurance, administration and
water. c Based on Hafi et al (1994), assuming a depreciation rate of four per cent. d For all except Littleton
and Sanders, based on Hafi et al (1994) who calculated the return as a residual after subtracting
depreciation and operating costs from the operating surplus. Hafi et la’s return was equivalent to 7.8 per cent
of the value of fixed assets. Littleton and Sanders assumed a return of between 4 and 8 per cent depending
on the nature of the assets involved.
Source: Commission calculations based on Read and Sturgess (1993), Hafi et al (1994) and Littleton and
Sanders (1993).
There is some evidence of economies of scale in the production of eggs in battery
cage systems. Calculations, based on Read Sturgess data, suggest that unit costs for
small producers (7 500 birds) are some nine per cent higher than for large
producers. The corresponding figure for medium sized producers is six per cent.
Alternative systems’ production costs
Barn production costs
The Commission sought information from a number of producers on the costs of
barn production in Australia — both in relation to the cost of inputs and compared
to caged and free-range production — with only limited success. Information
provided by one producer (table 5.3) suggests that barn production costs are some
IMPACTS ON
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61
40 per cent higher than for caged production systems, reflecting both higher feed
and labour costs for barn systems. However, underlying these cost differences is a
far higher mortality rate for barn and free-range hens compared to battery hens.
Other information provided to the Commission indicates that these differences in
mortality rates are considerably higher than industry norms. Thus, the data in table
5.3 may overstate ‘typical’ cost differences between battery cage and the other
production systems.
Higher feed costs per egg reflect the birds’ greater opportunities to undertake a
fuller range of activities (flapping of wings, dust bathing and just moving around)
and therefore a greater diversion of energy into non-laying activities. One important
reason for higher labour costs in barns is the need to gather eggs laid outside the
barns’ laying boxes — in some cases, eggs are collected several times a day to avoid
spoilage. The NSW Farmers’ Association suggests that labour requirements are
three times higher in barn systems compared to cages.
Labour costs for barn systems can be reduced by greater use of automation, albeit
with some increase in capital costs. One producer advised that most variable costs
are similar between the two systems, but capital costs per bird are higher for barn
production (a shed on the property in question held only a quarter to one-sixth of
caged bird densities). The producer considered food consumption per bird to be
higher (by 10 to 20 per cent) and egg productivity per bird lower. On this property,
higher hen mortality rates for barn production (compared with battery cage systems)
were not a significant cost driver.
Table 5.3
One producer’s relative costs per egg for different production
systems
Cost Componentsa
Feed costs
Labour costs
Other variable costs
Total variable costs
Cagedb
Barnb
Free-rangeb
100 (51)
100 ( 5)
100 (44)
100 (100)
118 (43)
353 (14)
140 (43)
140 (100)
123 (39)
667 (23)
144 (39)
162 (100)
aEach component is expressed as a percentage of the battery cage cost for that component. Capital costs
are excluded. bFigures in parentheses are the percentage contribution to the total cost of each system.
Source: Derived from information supplied to the Commission.
Although now somewhat dated, data comparing costs of various systems are also
available from MacIndoe (1987) and the Tasmanian Department of Primary Industry
(TDPI, 1990). Their costs differ markedly from those shown in table 5.3. Data from
both studies suggest deep litter (barn) production costs are only some 7 per cent
higher than battery cage costs (TDPI, 1990, p. 33; MacIndoe, 1987, p. 133).
62
BATTERY EGGS
Free-range production costs
Table 5.3 suggests free-range production is considerably more costly per egg than
either caged or barn production systems.6 In part, this reflects its greater labour
intensity. The NSW Farmers’ Association suggests that labour requirements are five
times higher for free-range systems compared to battery cage systems (sub. 78,
p. 10). But other factors are also important, for example, higher free-range mortality
rates also increase costs.
Other systems’ production costs
Although now somewhat dated and not based on Australian data, the work of Elson
(1985) shown in table 5.4 provides a guide to how costs of production vary in a
number of commercial and experimental systems. The main point to note is the cost
relativities between battery cage production and the ‘near-barn’ production systems
of aviary, perchery and deep litter. The unit production costs of aviary/perchery
systems are only 5–8 per cent more than battery cage costs, and that of deep litter
systems, about 18 per cent more.
Table 5.4
Production costs in different egg production systems
(Battery Cage equals 100)
System
Battery cage
Aviary, perchery and multi-tier
houses
Two-tier get-away cages
Aviary
Deep littera
Straw yard
Semi-intensive
Free-range
Stocking density
Cost index
450 sq cm/bird
20 birds/sq m
100
105-108
na
10-12 birds/sq m
7-10 birds/sq m
3 birds/sq m
1000 birds/ha
400/ha
110
115
118
130
135-140
150-170
a Deep litter approximately corresponds to barn production in Australia, although the stocking density is
higher than the RSPCA-endorsed 5 birds/sq metre.
Source: Elson (1985) cited in Appleby et al (1992, p. 72).
Other European studies undertaken in the late 1980s tend to reinforce Elson’s
findings. For example, Haartsen and Elson found that aviary costs of production
were 5 per cent higher than battery cage systems, while deep litter costs were 16 per
cent higher. Similarly, Tucker’s results indicated deep litter production costs to be
6 MacIndoe’s (1987) data indicate free-range costs of production to be in the order of 40 per cent
higher rather than the 60 per cent indicated in table 5.3.
IMPACTS ON
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63
12 per cent higher than battery cage costs, and free-range production costs 52 per
cent higher (studies cited in Appleby 1992, p. 75).
More recently, the European Commission’s Scientific Veterinary Committee (SVC)
concluded that, based on the studies available to it, aviary/perchery systems have
production costs some 8–15 per cent higher than battery cage systems, with deep
litter costs some 18 per cent higher. Free-range costs were 40 per cent higher (table
5.5).
Table 5.5
Egg production costs in different systems: SVC results
(Battery Cage equals 100)
System
Battery cage
Battery cage (large)
Aviary/perchery
Aviary/perchery
Deep littera
Free-range
Stocking density
Cost
450 sq cm/bird
600 sq cm/bird
20 birds/sq m
12 birds/sq m
7 birds/sq m
1000 birds/hectare
100
105
110
115
120
140
a Deep litter approximately corresponds to barn production in Australia, although the stocking density is
higher than the RSPCA-endorsed 5 birds/sq metre.
Source: Stevenson (1997).
Studies undertaken in Switzerland (Swiss Society for the Protection of Animals
STS 1994) and by the Agricultural Economics Research Institute of the Netherlands
(Van Horne 1997) show costs around 10 per cent higher for eggs produced in aviary
systems compared with battery cage, although results from a survey of 17 per cent
of the English laying flock showed higher cost differences. This latter study
reported perchery costs 24 per cent higher than battery cage costs, while free-range
costs were 40 per cent higher (Roberts and Farrar (1993) cited in Stevenson (1997)).
The information available to the Commission clearly shows that no alternative egg
production system has costs as low as battery cage systems. Of the alternative
systems, barn, or near barn, appear to have the lowest production costs and freerange the highest. The magnitude of the cost difference between battery cage and
barn is difficult to ascertain. However, on the basis of the information available, the
Commission considers that present farm production costs in Australia for barn
systems are, on average, of the order of 35 per cent higher than for battery cage
systems — $1.70 per dozen compared to about $1.25. These costs include an
allowance for depreciation and a return to owners’ equity. There are, however, two
interrelated reasons why this difference is likely to fall over time:
64
BATTERY EGGS
•
modern barn production is in its relative infancy, compared to battery cages, and
costs are likely to fall through ‘learning-by-doing’ and as producers become
better acquainted with European practices and technology. For example, current
Australian barn production, based largely on converted sheds built for battery
cages, makes relatively little use of vertical space. It therefore has relatively low
bird numbers per floor area; and
•
battery cage production is a relatively ‘old’ technology which is likely to have
less scope for improvement than barn technology which is relatively ‘new’ and
therefore likely to provide more of a pay-off from R&D. A number of industry
observers commented on the greater returns that were possible from investment
in barn R&D compared to research into battery cage systems.
In the longer term, it is likely that barn production in Australia will evolve into
something akin to European aviary or perchery systems. This implies a narrowing of
the current cost differences between caged and barn production. In this event, the
cost difference between barn and cage production could decline to about 10 to 15
per cent in the longer term — broadly in line with current European differentials.
5.3
Impact of the ban on producers
The Commission’s approach
Assessing the impact of the ban on producers involves comparing what would
happen with the ban on battery caged production with the counterfactual — what
would happen in its absence. In undertaking such an analysis it is necessary to
characterise the future costs of production in barn systems .
One issue is how the costs of barn production change as the scale of the industry
increases. This study follows that of Hafi et al (1994) which suggests that increases
in the quantity of barn eggs supplied does not raise long run costs of production:
... it is argued that in the long run supply of poultry products ... is likely to be infinitely
elastic because the intensive agricultural production techniques used in their production
require little land, implying there are no long run rents to producers.
The other issue is whether technological change is likely to drive down production
costs. As noted previously, there are prospects that the production costs of barn eggs
(and the current difference in production costs between caged and barn production)
will diminish over time.
IMPACTS ON
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65
What are the production-related issues to be addressed?
From a national cost/benefit perspective, the Commission considers the following
issues to be pertinent to its terms of reference:
•
the value to society of any extra resources needed to produce the eggs ACT
residents will consume if the ban is introduced; and
•
the cost to society of any adjustment costs from the ban (eg from premature
scrappage of the Parkwood property’s capital stock).
In addition, there are issues related to the impact of the ban on specific individuals
— for example, on the owners of the ACT Parkwood property and on existing
producers of eggs from battery cage and alternative systems.
Extra resources needed to meet ACT consumption
It is likely that the extra cost of providing barn eggs will be fully passed on to ACT
consumers as higher prices. The implications of this increase are therefore discussed
in the following chapter.
In addition to the extra resources needed for production at the farm level, there may
be additional distribution and transport costs as a result of the ban. For example,
barn production farms may, on average, be smaller than battery cage facilities and
be more dispersed. Other thing being equal, this implies additional transport costs
for the finished product, for feed and other inputs. However, such extra costs are
likely to be small.
Adjustment costs of the ban
Taking the industry as a whole, some part of it will need to convert from battery
cage to barn production if the ban proceeds. On the face of it, there are three
possible sources of potential costs to society from such a conversion:
•
additional investment associated with the new production of barn eggs;
•
costs arising in the period immediately before the ban is introduced, as some
producers commence or increase barn production and others cease battery cage
production in anticipation of the change; and
•
premature scrappage or redundancy of some existing battery cage production
capital.
At least some of the new investment for meeting the additional demand for barn
eggs is likely to initially come from the conversion of existing battery cage sheds.
66
BATTERY EGGS
This would involve some new plant and equipment, additional shed partitions and
the installation of concrete floors. Estimates of the conversion costs provided to the
Commission range from $8 to $10 per bird. If new sheds are built, as would be the
case in the longer term, these costs would be substantially higher — of the order of
$30 per bird (industry estimates and TDPI (1990, pp. 84–85)).
However, these additional investment costs would be reflected in the production
costs of the previous section — and thus ultimately in higher prices to consumers.
To add them to the costs of the ban would be a form of double counting.
Adjustment costs may also stem from the fact that the ban commences on a
particular day, but producers must install barn capacity prior to that time. If barn
production increases before the ban commences, there could be a very short term
oversupply of barn eggs, with prices falling. However, this results in only temporary
transfers from producers to consumers, rather than any significant net resource
losses.
Some existing buildings, cages, internal plant and equipment, such as that associated
with intra-farm feed, water and egg conveyancing, may become redundant as the
result of the ban. Of course, to the extent that this equipment can be purchased and
used elsewhere, there is no cost to society apart from the transaction costs involved
(eg the cost of dismantling the existing plant and its transport and refitting at new
locations).
Estimating adjustment costs of this nature is particularly difficult. The
counterfactual or base line — what would happen if there is no ban — involves
forecasting when the property’s plant and equipment, with normal maintenance,
would become redundant in the normal course of events. This is not just a matter of
estimating the remaining productive life of the plant and equipment. New
technologies and changing consumer preferences could make the present plant and
equipment redundant, as could, for example, a decision by the ACT Government to
alter land use requirements at the termination of the Parkwood property lease on 31
December 2005.
The Commission’s estimate of these adjustment costs — based on the premature
retirement of Parkwood’s assets —is discussed below. However, it needs to be
noted that the approach is likely to overstate the costs to society. This occurs
because a considerable share of Parkwood’s capacity meets demand outside of the
ACT. In the event of the ban, that demand will be diverted to other, non-ACT,
producers. Their capacity to supply this demand is enhanced by the excess capacity
they currently appear to have (section 5.1). Thus, the diversion of supply from the
ACT is likely to reduce early retirement of assets and employment shedding in other
IMPACTS ON
PRODUCERS AND JOBS
67
states, partly offsetting the adjustment costs felt by Parkwood in the ACT.
Parkwood’s private adjustment costs could, therefore, be regarded as an upper
bound for the adjustment costs of the ban.
Impact on the ACT producer
Bartter Enterprise’s Parkwood property of 41.4 hectares is one of the larger in the
industry. It has 50 employees and 210 000 hens housed in seven steel framed
poultry sheds. Feed for the property is supplied from Bartter’s Griffith, NSW
property.
Although operating since the early 1980s, Bartter regards the property’s operations
as relatively modern. Egg collection and feed delivery are automated, the sheds have
climate control and the property washes, grades, packs and delivers its eggs to
customers. The company considers that, because of regular repair and maintenance,
the property’s plant and equipment is as productive as when first installed.
Bartter has advised that, if the ban proceeds, it will cease production at Parkwood
(sub. 30, p. 6) and, as a result, the business would suffer a capital loss of $7 million
in current terms ($5 million in 6 years time). Because of the cost and damage
involved, the company considers removal of plant and equipment from Parkwood is
uneconomic.
Bartter provided an independent valuation of the Parkwood property of $7.5 million
as at October 1994. The assets involved consisted of:
•
layer sheds and associated equipment valued at $5.1 million, or about 68 per
cent of the total;
•
feed storage, egg grading and associated plant and equipment, valued at $1.16
million, or about 15.5 per cent of the total;
•
employee residences valued at $0.37 million, or about 5 per cent of the total;
•
land (41.4 ha) valued at $0.275 million, or about 3.7 per cent of the total; and
•
other (office, infrastructure and minor plant and equipment) valued at $0.62
million, or about 8 per cent of the total.
The independent valuation of Parkwood implies an asset value of approximately
$36 per bird. This figure is broadly consistent with Larkin (1993, paragraph 5.20)
which, based on data from the Read Sturgess survey, estimated asset replacement
values for large egg producers at $36–$60 (excluding hen replacement ).
68
BATTERY EGGS
The value of employee residences and the land may not have changed appreciably
since the independent valuation. It is possible that their value may not change
significantly over the 6 year period before the ban is implemented. On the
assumption that the value of these assets can fairly easily be realised, the
Commission considers it appropriate to subtract their value from Bartter’s estimate
of Parkwood’s current value, and from its estimate of the property’s value in 6 years
time, making the present and future values $6.4 million and $4.4 million,
respectively.
The independent valuer’s figures imply that 68 per cent of Parkwood’s (unadjusted)
value is layer sheds and associated equipment. Applying this percentage to Bartter’s
estimate for the Parkwood property in 6 years time ($5 million), the estimated value
of the layer sheds is $3.4 million, or approximately $16 per bird for the then 20 year
old sheds. TDPI (1990, p. 89) assumes that, after 20 years, sheds are worth only 10
per cent of their purchase value. The AEIA (sub. 76, p. 30) claims that the
indicative economic life of equipment in the battery cage system is 20 to 25 years. If
these asset lives applied to Parkwood, they would imply a much lower value for the
sheds and associated equipment than $16 per bird (given a new price of around $30
per bird). However, the Parkwood valuation is broadly consistent with the Read
Sturgess (1993, p. 14) survey’s average replacement value of assets for shedding per
bird of $14.02 (although the average asset lives of the survey farms may differ
somewhat from the Parkwood facility). Moreover, as noted above, through
maintenance, sheds can retain a relatively high valuation even if relatively old.
For these reasons the Commission has used the $4.4 million estimate as
Parkwood’s, and society’s, potential loss if the ban proceeds. In view of the
uncertainty over the asset values and the surplus capacity in the industry, this ‘oneoff’ cost could be regarded as an upper bound. It is equivalent to a cost per year in
perpetuity of approximately $290 000, assuming a discount rate of 7 per cent, or a
little under one dollar for each ACT resident per year.
There may be other costs to Parkwood’s shareholders. For example, the effect of the
ban is likely to decrease any goodwill value of the Parkwood business.7 There is no
information available to estimate this possible decrease.
7 On the other hand, there may be some offsetting benefits for Parkwood. For example, it is possible
the land site is more valuable in an alternative use, such as residential land. Moreover, there may
be some gains to Bartter in NSW if they can use existing capacity to meet non-ACT demand that
used to be supplied from Parkwood.
IMPACTS ON
PRODUCERS AND JOBS
69
5.4
Employment impacts
In the event of a ban on cage production in the ACT, Bartter advises that 47 of its
50 staff, mainly production workers, would be redundant. These workers would be
offered work at Bartter’s Griffith business, but the number of staff which would
take up this offer is unknown.
The net employment effect on the national economy of a ban is probably negligible.
While almost certainly some of Parkwood’s employees will not take up the offer of
alternative employment — for example, because spouses are employed in the ACT
or because they have alternative employment prospects — any reduction of
employment in the ACT flowing from the closure of Parkwood would be offset by
increased employment elsewhere in Australia. Indeed, because barn production is
slightly more labour intensive than battery cage production, there may be a small
increase in overall industry employment. On the other hand, there will be
adjustment costs for those Parkwood employees who decide to take-up employment
in other Bartter enterprises. These may include dislocation of friendships and family
relations, as well as transaction costs of selling the family home and relocating.
5.5
Concluding comments
The introduction of a ban on battery egg production in the ACT involves two basic
costs to society: additional resource costs of producing eggs from the next cheapest
alternative; and early redundancy of some of the industry’s capital stock. The
Commission estimates that the increase in farm production costs will be of the order
of 10 to 15 per cent in the longer term and that producer adjustment costs will be of
the order of $4.4 million. There will also be additional adjustment costs for Bartter’s
Parkwood employees, but the extent of these costs is unknown.
But what of the incidence of these changes — who gains and who loses? Clearly,
Bartter’s employees will be worse off, although there will be offsetting gains for
other members of the national workforce. The ban may result in some short term
gains for producers of barn eggs, all of whom at present are located outside the
ACT. However, barriers to entry for barn production appear minimal, especially for
existing caged producers, and 6 years allows ample time for producers and
distributors to anticipate the effects of the ban. Thus, in the Commission’s view, any
above normal profits for barn producers will evaporate quickly, were they to arise at
all.
What will be the impact on producers of battery hen eggs outside the ACT? Given
that: interstate battery cage producers provide only about 20 per cent of the ACT
70
BATTERY EGGS
market; there is a six year transition period; and the likelihood the current ACT
producer will close down, non-ACT producers of battery caged eggs would appear
to be likely to suffer only minor disruption and losses at most. Indeed, given that
they will gain Parkwood’s non-ACT market share, they may well gain overall.
What of the ACT producer? The impact on Parkwood’s beneficial owners (resident
in NSW) of a ban would not be trivial. They, along with the property’s employees,
would bear most of the costs associated with the ban that are not borne by ACT
consumers. The cost to consumers of a ban is discussed in the next chapter.
IMPACTS ON
PRODUCERS AND JOBS
71
6
Impacts on the ACT community
6.1
Introduction
This chapter sets out the impact on the ACT community of the ban on battery hen
eggs in the ACT and of the labelling requirement. It begins by looking at the nature
of the ACT market for eggs, and then makes an assessment of the impact of the ban
on prices and quantities of eggs sold. The apparent costs to consumers stemming
from the higher prices that are charged for non-battery eggs is then assessed. The
chapter also examines how these costs affect different socio-economic groups in the
ACT.
The costs estimated by following this process (see section 6.6) assume that existing
patterns of egg purchases fully reveal people’s preferences. However, this may not
be true for a number of reasons:
•
people may care not just about their own egg consumption and its associated
implications for hen welfare, but also about the animal welfare impacts of
others’ consumption, over which they have no control (so-called ‘externality’
effects);
•
people may be ignorant of, or have misperceptions about, hen laying conditions
(assuming they care about hen welfare), and would buy alternatives to battery
eggs if they were informed;
•
people may not be sure which eggs are produced by battery cage methods
compared to alternatives, so that they may sometimes think they are buying nonbattery eggs when they are not. Disclosure of the type of eggs being purchased
may increase demand for battery egg alternatives, even at existing prices; and
•
there may be other obstacles to unimpeded consumer choice.
These issues are examined in section 6.6.
Finally, this report is about the public or community benefit. The public benefit may
be different from the sum of the impacts on individual consumers (and producers).
In particular, the overall impact on the ACT community may need to take account of
other factors, including social norms. Section 6.7 examines how these can be
incorporated into policy-making.
IMPACTS ON THE ACT
COMMUNITY
73
6.2
The ACT market
It is estimated that ACT residents consume about 3.3 million dozen eggs a year —
either directly as eggs or as constituents of other products, such as cakes or
mayonnaise (table 6.1).
Table 6.1
Estimated egg consumption in the ACT, 1987–88 to 1998–99
Eggs per
ACT
person population
per year,
Australiaa
Million dozen per year of commercially produced eggs
consumed in the ACTb
Direct Via cafes &
Via Via ACThousehold restaurants ’imported’
made
consumption
products products
1987–88
1988–89
1989–90
1990–91
1991–92
1992–93
1993–94
1994–95
1995–96
1996–97
1997–98p
1998–99p
153.0
146.0
142.0
142.7
141.0
141.0
140.0
135.0
132.0
132.0
131.7
130.6
272 129
276 432
282 211
289 320
294 674
299 302
301 486
304 805
308 251
309 794
311 600
313 500
2.66
2.58
2.56
2.64
2.66
2.70
2.70
2.63
2.60
2.62
2.63
2.62
0.37
0.36
0.35
0.36
0.37
0.37
0.37
0.36
0.36
0.36
0.36
0.36
0.20
0.19
0.19
0.20
0.20
0.20
0.20
0.20
0.20
0.20
0.20
0.20
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
Total
3.33
3.23
3.21
3.30
3.32
3.38
3.38
3.29
3.26
3.27
3.28
3.28
a Data on eggs per person in Australia are from the ABS (Cat. No. 4306) and include estimates of backyard
production as well as eggs used by businesses, such as bakeries. Other sources provide different
perspectives. Larkin et al (1997, p. 65), citing International Egg Commission data, suggest that Australian
egg consumption per capita was rather higher at 154 eggs per year in 1993–94 (10 per cent higher than the
ABS estimate). The AEIA (sub. 76, p. 4) suggests that the ABS underenumerate domestic egg production by
about 25 per cent. Another ABS source, the Household Expenditure Survey (combined with price data from
ABS Cat. No. 6403) suggests consumption of about 91 eggs per capita nationally. The latter excludes
backyard and commercial use of eggs. Given these disparate estimates, we have used the official estimates
from Cat. No. 4306. The data for 1990–91, 1997–98 and 1998–99 were extrapolated on the basis of an
estimated logistic function for egg consumption per capita (E), which was Et = 1/(0.0083 - 0.0017 * 0.92t)
where t = 0 is 1987–88.
b These calculations follow the methodology of the NSW Farmers’ Association (sub. 78, p. 13) and assume
that total ACT consumption per capita is similar to the national consumption. This assumption is supported
by the Household Expenditure Survey, which (with price data from ABS Cat. No. 6403) reveals only small
differences between ACT and national consumption (95.4 eggs per capita compared to 91.3). An estimate of
the number of commercially reared eggs was obtained by subtracting backyard production, which is
estimated at 4 per cent of total consumption in the ACT (chapter 5). These commercially reared eggs were
apportioned between the various uses described in figure 6.1.
p Preliminary data.
Sources: ABS Cat. Nos. 4306, 3201 and 3222; and sub. 78.
In Australia, egg demand per capita has been falling, as in a number of countries
(Fearne and Lavelle (1996, p. 8) and Larkin et al (1997, p. 35)).
74
BATTERY EGGS
Direct household consumption accounts for the greatest proportion of egg
production in Australia — with the ABS suggesting it is about 92 per cent of the
value of total Australian egg supply (table 6.2). Restaurants, fast food,
accommodation and other industrial use account for the remainder. The ABS
acknowledges that its estimates of the share of industry usage of eggs is probably
understated. Egg industry research suggests more significant usage of eggs by
industry for Australia as a whole (Larkin et al 1997 and the AEIA, sub. 76, p. 4).
Table 6.2
Disposal of egg industry output by value, Australia
Percentage of final outputa used by different
sectors
Sector of use
Households/retail
Food service and institutional sectors
Restaurants, fast food and accommodation
Health (hospitals and allied) and defence
Catering, transport
Inputs into food manufacturing
Baking products manufacture
Cereals and pasta
Mayonnaise
Ice cream/dairy/baby food
Confectionary
Total domestic usage
ABS inputoutput tables
1994–95b
92
6.9
6.7
0.1
..
1.1
0.8
..
..
..
..
100
AEIA estimate Larkin et al for
for 1998
1997
70
15
..
..
..
15
..
..
..
..
..
100
60 – 70
..
8 – 20
3 – 15
1.25 – 3
..
3 – 12
1
0–4
0 – 0.5
0 – 0.5
100
a Excludes backyard production.
b Supply is measured as the value of total Australian production, less exports and change in inventories for
1994–95. The ABS noted that it suspects that the industry usage of eggs may be too low because the basis
of the estimate was the 1986–87 input structure for the industry. It considered that subsequent changes in
eating patterns would have led to more eating out, and a higher share of consumption of eggs via food
service and other industries.
Sources: AEIA (sub. 76, p. 4), unpublished data from the input-output tables provided by the ABS and Larkin
et al (1997, p. 72).
Market shares midway between the ABS and AEIA estimates are used for the
analysis which follows (figure 6.1). A reasonable assumption is that around 80 per
cent of eggs consumed by ACT households are consumed directly, while the
remaining eggs are consumed indirectly, from either cafes and restaurants, or as
ingredients in various industrial products (such as shampoo and food mixes, which
are mostly imported from interstate or overseas).1 This, in turn, suggests per capita
consumption of around nine dozen eggs per year (from table 6.1).
1
In appendix D, we suggest that the market share (by egg numbers) of households will probably
decline to around 75 per cent, as other uses of eggs increase.
IMPACTS ON THE ACT
COMMUNITY
75
Figure 6.1
Eggs directly and indirectly consumed in the ACTa
Cafes, fast-food & restaurants
11%
11%
80%
Eggs consumed
directly and indirectly
in the ACT
ACT households
6%
9%
3%
Industry in other states & overseas (eg shampoo, food products)
ACT industry (eg bakeries)
a Based on averaging the ABS and AEIA estimates of usage. It has been assumed that two-thirds of indirect
consumption through processed egg goods is met by products imported from interstate and overseas.
Using supermarket data for the ACT and NSW, the NSW Farmers’ Association
(sub. 78, p. 13) estimates that 4.3 per cent of eggs sold directly to households are
barn-lay, 9.6 per cent are free-range and the remainder are sourced from battery
cage systems (table 6.3).2
6.3
What are retail prices now and what will happen to
them?
As noted in previous chapters, the ban on battery egg sales in the ACT is most likely
to shift sales to the barn-lay method, rather than the considerably more expensive
free-range system. In chapter 5, the Commission estimated that the production
costs3 of a dozen 700gm barn-lay eggs are currently around 35 per cent greater than
the equivalent weight of battery eggs (that is, around $1.70 per dozen compared to
about $1.25 — or 45 cents more per dozen).
2 Note that sub. 78 defines the shares in terms of egg numbers, not egg values. Because of higher
prices for free-range and barn-lay eggs, the market share in the retail sector of these non-battery
eggs would be higher in value terms than in the quantity terms shown here.
3 Including full allowance for depreciation, a return to capital and management fees. Note that actual
farm gate prices may sometimes be less than production costs in the short run, given oversupply
conditions (Littleton and Davies 1994) — but these cannot persist in the long run. We do,
however, take account of excess supply conditions in the current battery egg market in the
calculations in appendix D.
76
BATTERY EGGS
Table 6.3
Market share of eggs by production system, ACT, 1998
Share of eggs
sold at the
retail levela
Barn-lay
Free-range
Battery cage
Total
%
4.3
9.6
86.2
100
Million dozen Million dozen
eggs retailed
eggs sold
per yearb outside retailc
No.
0.113
0.252
2.257
2.621
No.
~0
~0
0.655
0.655
Million dozen
eggs sold in the
ACT
Share of all
eggs
consumed in
the ACT
No.
0.113
0.252
2.912
3.276
%
3.4
7.7
88.9
100.0
a In comparison, the AEIA suggests that free-range eggs account for about 5 per cent of the national
quantity of eggs, while barn-lay account for about 2 per cent (sub. 76, p. 55). Backyard production is
excluded from all calculations in this table.
b The data in this column are calculated by noting that direct household consumption in the ACT is 80 per
cent of 3.276 (or 2.621) million dozen eggs. The proportions in column one are then used to derive the egg
volumes.
c This ignores any sales of eggs produced by free-range and barn-lay methods for commercial customers.
However, aggregate sales of such eggs will be relatively small. The AEIA (sub. 76, p. 55) assumes the
same.
Source: NSW Farmers’ Association (sub. 78).
However, these cost differences are currently amplified by larger absolute
wholesale/retail margins applied to barn-lay eggs. Data on retail prices from the
Australian Supermarket Institute (ASI) suggest that the average margin between
production costs and retail prices for barn eggs is somewhat higher than battery eggs
(table 6.4). Thus, while the gross margin is $1.63 for battery eggs, it is $1.99 for
barn-lay eggs. Grading, packaging and transport costs to destinations are roughly the
same for different types of eggs.4 This implies that the extra margin earned on nonbattery eggs reflects the higher returns earned on niche products — and would also
explain the higher entry rate and market growth of the barn system.5
ACT retail prices of barn-lay eggs are currently around 28 per cent higher than
battery eggs (using ASI data) and around 35 per cent higher using the Commission
survey data (appendix E). However, even if there is no beneficial technological
change or learning in the barn system over the next five years, the retail price
difference is likely to be smaller after the ban than now. This is because barn-lay
eggs would become the most commonly retailed type of fresh egg in the ACT (like
battery eggs are now). Competition between retailers and farms in this high volume
market would tend to reduce barn-lay price margins towards existing battery cage
4 Although there may be some small volume effects, particularly for free-range farms, which tend to
operate at much lower scale than barn-lay or battery cage farms.
5 Stevenson (1997, p. 11) has found the same for the UK.
IMPACTS ON THE ACT
COMMUNITY
77
margins — that is towards a $1.63 margin.6 This would imply barn-lay retail prices
of $1.70 plus $1.63, or $3.33. Thus, even if the relative production costs remain
around 35 per cent higher for barn-lay compared to battery cage, the relative retail
prices may well shrink to around 16 per cent. 7
Table 6.4
Indication of prices by egg type by points in the distribution
chain, ACT, September 1998
($ per dozen)
Battery cage
Barn-lay
Free-range
Production costsa
Supermarket buy
priceb
Retail sale priceb
Gross margin
1.25
1.70
2.15
2.38
2.95
3.35
2.88
3.69
3.85
1.63
1.99
1.70
a Production costs include variable and fixed costs, plus a normal return to the producer. They do not cover
the costs of grading, packaging, transporting, holding and retailing — which, with profit margins, explains the
difference between production costs and retail prices.
b The data are the average for the major supermarket chains (Coles, Franklins and Woolworths). We
obtained similar data from a survey of retailers in Canberra (appendix E), albeit with slightly higher prices for
barn-lay eggs and slightly lower for free-range. Selling prices may be lower when there are ‘specials’ and
higher per egg for smaller carton sizes or specialised products (such as the Omega 3 egg).
Sources: Data provided by the Australian Supermarket Institute and producers, and calculations made by
the Commission.
There are two likely future sources of reduced relative production costs for barn-lay
compared to battery eggs:
•
there are likely to be better prospects for technology improvements and learning
in barn systems compared to the mature battery cage system; and
6 It is assumed that supermarkets and others will reduce their margins on barn-lay eggs after a ban.
However, this assumption may be in error. Larkin (1993) says that retailers captured a substantial
share of the gains from egg deregulation — though this may have represented a correction of
previously low margins. If the assumption is wrong, it has impacts on the distribution of costs
from the ban, but only ‘third order’ impacts on the net measure of costs. Why? At the moment,
ACT supermarkets sell around 2.6 million dozen eggs a year. The gross margin earned by retailers
and wholesalers (including packagers) on these eggs is about $4.3 million. If margins on barn-lay
eggs did not change, they would earn a margin of about $5.1 million. The costs of dealing with
barn-lay eggs in high volume are about the same as battery eggs, so the extra margin of $0.8
million would represent pure profit to the supermarkets. So long as any such profits were retained
in Australia, this would represent a transfer from consumers to retailers — rather than a net cost of
the measure to Australia. There would, however, be an additional impact of the higher prices on
demand — but this would be slight. Appendix D explores how margins, prices and costs interact in
detail.
7 However, there may be transitory fluctuations in prices away from this margin, just prior and just
after the ban, as supply of barn-lay eggs adapts to the changed circumstances.
78
BATTERY EGGS
•
existing barn-lay production costs are based on RSPCA standards which may not
apply to new barn-lay production (for example, future stocking rates may be
higher, as they appear to be in Europe).
In the analysis which follows it is assumed that, over the long run, the production
cost gap declines to around 15 per cent, which appears feasible given overseas
experiences (chapter 5). This (with a number of more subtle influences described in
appendix D) implies that retail prices would be about 13 per cent higher for barnlay compared to battery cage eggs at the time of the ban and about 6 per cent in the
long run. Because of uncertainty about how costs will move, the Commission also
considers a number of other scenarios, including no cost reductions for the barn-lay
system.
6.4
Impact of the ban on the demand for eggs
All quantitative studies of egg demand, both here and in other developed economies,
suggest that consumption of shell eggs by households does not respond much to
price changes (demand is ‘inelastic’) — reflecting the product’s unique qualities.
The Commission looked at a range of quantitative estimates of the price elasticity
(table 6.5), and on the basis of these has assumed an elasticity of -0.2. If retail
prices of eggs increase by between 13 and 16 per cent at the time of the ban (as
discussed above), then this elasticity implies that household egg demand will fall by
between 2.6 and 3.2 per cent after the ban is put in place.
Given this modest quantity effect, speculation that consumers will, on the one hand,
miss out on a nutritious food, or that, on the other, will benefit from lowered
cholesterol, appears largely misplaced.8
8
Eggs are complex foods, which are highly nutritious AEIA (sub. 76, p. 35) but have high levels
of cholesterol (Appendix 5, sub. 50). The Australian Heart Foundation notes that “the richest,
most commonly eaten source of cholesterol is egg yolk. A single egg yolk contains almost 200 mg
cholesterol, accounting for about half the average daily cholesterol consumption in the Australian
diet.” It recommends moderation in consumption, even for those with currently low cholesterol
levels (http://www.heartfoundation.com.au/docs/pp1.htm). Brown and Schrader (1990) found 896
scientific articles over the period from 1955 to 1987 supporting a link between dietary cholesterol
and heart disease. However, they also found 39 questioning such a link. The Baker Medical
Research Institute (an NHMRC block-funded Institute affiliated with Monash University and the
Alfred Hospital with a special focus on cardiovascular disease) recommends reductions in dietary
cholesterol, such as limited consumption of eggs, brains and a range of other foods
(http://www.baker.edu.au/index.html). However, any health impacts (positive or negative) of
reduced egg consumption generated by the price increases must (a) be very small since demand
does not change much as a result of the ban, and (b) be qualified given considerable scientific
uncertainty about the overall health impact of complex foods, such as eggs. These health issues are
not considered important in the current context.
IMPACTS ON THE ACT
COMMUNITY
79
Table 6.5
Price elasticity estimates for commercially produced shell eggs
Study
Comments
Australian studies
Gruen et al 1967
Banks and Mauldron
1966
Collard et al 1982
Hickman 1979
BAE 1983
Estimate used in
modelling welfare
changes of regulations
— based on past
studies
Oczkowski and Murphy
1998
Non-Australian studies
Beck, Hoskins and
Mumey 1994
Kulshreshtha and Ng
1977
Harling and Thompson
1985
Elasticity based on a
previous study
Based on extensive
literature search, and
taking the highest and
lowest estimates
Sandiford 1985
Huang and Haidacher
1983
Wohlgenant 1989
Brown and Schrader
1990
Chavas and Johnson
1981
6.5
Elasticity
Location
-0.013
-0.3
Australia
WA
-0.3
-0.3
~0.0
-0.15
-0.2
Victoria
Victoria and Qld
NSW and SA
Australia
Australia
~0.0
-0.16
-0.24
NSW, Victoria and WA
Qld
SA
-0.12
Canada
-0.003
Canada
-0.11 to -0.22
-0.27 to -0.45
-0.09 to -0.18
Canada
Germany
United Kingdom
0.0 to -0.2
UK
-0.14
-0.09
US
US
-0.02 to -0.17
-0.1
US
US
What are the welfare impacts of the ban on ACT
consumers?
Direct impacts on households
Ignoring for the moment any of the anomalies identified in the introduction, the
economic costs of the ban arise because people are forced to purchase more
expensive eggs than they would if they were free to choose. The costs have two
components:
80
BATTERY EGGS
•
people have to pay a premium for the eggs they purchase. This cost is equal to
the quantity purchased times the premium; and
•
the number of eggs consumed falls, because eggs are more expensive compared
to other goods. The cost here is the lost ‘pleasure’ of such consumption. This
cost is quite small because egg demand is so unresponsive to price increases.
Offsetting these costs partly, existing consumers of barn-lay eggs gain from the ban,
because retail margins on such eggs are likely to fall as volume rises.
The detailed calculations are shown in appendix D, including the formal framework
that underlies the cost calculations. The calculations take into account:
•
the likely fall over time in the price gap between barn-lay and battery eggs;
•
the current trend towards non-battery eggs;
•
the fact that costs are borne every year into the future;
•
the ACT’s population growth;
•
people’s preference for current consumption over future consumption; and
•
falling per capita egg demand.
An estimate of the yearly cost is the constant amount of savings per year (the
perpetuity) which the ACT community would have to put aside to pay for the future
price premiums on eggs. This quantum is just over $520 000 per year in 1998–99
current prices (paid every year from 2005–06), or about $1.60 per person per year.9
Of course, the actual costs of the ban are higher at the time of the introduction of the
ban and lower in the future (figure 6.2). But, if the community puts aside the
constant annual amount above, these costs can be met.
Impacts on restaurants, cake shops and other egg users
There are also a number of indirect impacts on consumers, since any price increase
for battery eggs will be reflected in other products made in the ACT which use these
as inputs (for example, restaurants, bakeries and food manufacturers). However, the
ban relates only to fresh shell eggs and not to imported egg products, such as liquid
egg or egg powder. A range of ACT businesses, such as cake shops, bakeries and
industrial users, either currently use such egg products, or could do so with little
difficulty. As well, the majority of manufactured products which incorporate eggs
(such as shampoo) are made either interstate or overseas and are not affected by the
9 Using the projected population at that time.
IMPACTS ON THE ACT
COMMUNITY
81
ban. Therefore, the impact of the ban on firms outside the food service sector is
effectively zero.
Figure 6.2
Projected direct costs for households for ten years af ter the
ban
Undiscounted costs ($m)
1.000
0.900
0.800
0.700
0.600
0.500
0.400
0.300
2013-14
2011-12
2009-10
2007-08
2005-06
0.200
Data source: Commission calculations (appendix D).
However, food service providers (including cafes, restaurants, fast-food shops,
hotels and hospitals) use fresh shell eggs for at least some of their products. Table
6.2 suggests that somewhere between 7 and 15 per cent of eggs are used by this
sector, with the Commission’s best guess being that it accounts for about 11 per
cent of the ACT market. It is likely that many of these eggs are shell eggs, whose
price will rise if the ban proceeds. The projected price increase per egg of around 3
cents will not significantly affect the final prices of most products. The effects are
likely to be most pronounced where margins are low, such as in fast food. But even
here, the overall impact on final prices are very small. For example, the price of a
hamburger with egg might increase from $3.00 to $3.05, or a 1.6 per cent price
increase. Overall, demand for restaurants, fast food and the accommodation sector is
not likely to be significantly affected.
Even so, a proper accounting of the costs of the ban should take account of the price
rises affecting indirect household consumption. Hence, it is assumed that:
•
currently all eggs used in the food services sector are fresh shell eggs;
•
all other eggs for industrial use can be sourced as pulp or powder from interstate;
and
•
the demand effects on indirect consumption are so small they can be ignored.
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BATTERY EGGS
The Commission also takes into account how the ban is likely to affect wholesalers
and retailers of eggs.
Our projections (appendix D) suggest that these total indirect costs amount to a
perpetual liability of about $130 000 a year (or an additional 40 cents per resident).
Overall cost impacts on the community
To gain an overall estimate of the cost of the ban, the adjustment costs felt by
producers and employees (such as the premature retirement of otherwise productive
assets like sheds or packing equipment) are also included. In chapter 5, these costs
were estimated as (no more than) $4.4 million as a one-off burden. Putting them in
equivalent terms to the costs enumerated in this chapter, this is equal to a perpetual
liability of no more than $290 000 a year. Overall, then, the total economic cost of
the ban is around $940 000 per year, or about $2.85 per year per ACT resident
(table 6.6). Varying our assumptions about future costs and margins over a
reasonable range produces results that do not differ substantially from the above
estimates (appendix D).
Table 6.6
Summary of costs for the ACT community of the ban
Nature of costs
In the year after the ban
Perpetuity
$m
$m
Direct consumer costs
0.75
0.52
Indirect consumer costs
0.15
0.13
Adjustment costs
4.40
0.29
5.3
0.94
Total
A number of submissions implied higher costs than the estimates above. The NSW
Farmers’ Association (NFA) estimated that consumers would bear a $1.10 premium
on retail egg prices (sub. 78, p. 14). Its figures imply that, if demand did not alter
significantly, the additional cost to ACT consumers would be about $3.2 million per
year. It argued that the cost might be even higher than this because supply shortages
in non-battery eggs would elevate prices. Its calculations differ from our preferred
scenario in appendix D mainly because:
•
it assumes fixed retail margins;
•
it does not include any potential for changes in relative production costs between
battery eggs and barn-lay eggs over time; and
IMPACTS ON THE ACT
COMMUNITY
83
•
by concentrating on the impact in the first year of the ban, it abstracts from other
long term factors influencing the cost.
The AEIA (sub. 76) arrives at a much larger estimate of the annual impact on
consumers of between $5.4 to $6.8 million (p. 25) and $4.03 million (p. 54). A
minor arithmetic error affects its calculations,10 and if corrected, while retaining the
spirit of its analysis, the costing is $3.4 million per year. This cost varies from the
Commission’s because of a much higher overall estimate of battery egg demand in
the ACT and the same differences in methodology as described above for the NFA.
Distributional impacts by socio-economic group
Because egg consumption is hardly affected by price changes, the approximate
income effects of the ban on different households can be calculated using existing
egg consumption data.
Data on income and consumption of ACT residents is somewhat dated, with the last
ABS Household Expenditure Survey relating to 1993–94 (table 6.7). However,
these data still provide a good guide to the percentage impact of the ban. The data
suggest that the impact of the ban would be extremely small for all income groups
and household types. However, a number of submissions (for example, the AEIA
(sub. 76, p. 35) and the Northern Territory Department of Primary Industry and
Fisheries (sub. 9, p. 2)) claimed that the ban would have a regressive impact — that
is, a bigger proportional impact on the incomes of poorer households. This is the
case, with the relative burden of the ban being 3.8 times greater for households in
the bottom 20 per cent of income than average households (table 6.8). Some
household types, such as low income, couple-only households, are more adversely
affected than others (table 6.9).
10 On page 25, the AEIA calculates that there are 4.836 million dozen eggs consumed by ACT
residents a year, but the population and per capita figures imply consumption of 4.03 million
dozen a year. On page 54, it is claimed that ACT residents consume 4 million dozen battery eggs a
year, but the calculations are performed using the incorrect 4.8 million dozen figure.
84
BATTERY EGGS
Table 6.7
Expenditure on eggs by income quintile, Canberra, 1993–94 a
Average household
per annum
expenditure on eggs
($)
Average household
per annum income ($)
Egg share of income
(%)
Average number of
people in household
Average per annum
personal consumption
($)
Lowest
20%
2nd
quintile
3rd
quintile
4th
quintile
Top
20%
All households
34.14
28.46
55.88
38.47
50.89
41.61
13 282
29 439
45 278
66 909
115 045
54 109
0.26
0.10
0.12
0.06
0.04
0.08
2.14
2.63
2.65
3.04
3.33
2.76
15.94
10.81
21.06
12.66
15.29
15.08
a The consumption relates to expenditure on all fresh eggs, but excludes eggs consumed in restaurants and
fast-food outlets, or as part of other products (such as cakes or cake mixes). The data are based on
responses from about 437 households. Data for Australia as a whole — which are based on a much larger
sample of 8 389 households— show a similar pattern.
Source: Calculations made by the Commission using the ABS Household Expenditure Survey Unit Record
File.
These regressive outcomes occur for two reasons:
•
egg consumption per household does not increase by much as household income
rises, so the cost burden of the measure is roughly the same in absolute dollar
terms for the rich and the poor — which translates inevitably to bigger impacts
proportional to income for lower income groups; and
•
existing consumption of non-battery eggs is likely to be higher among the welloff than lower income groups.11 Consumers of non-battery eggs will, if
anything, benefit from a price cut in their purchases as the increase in demand
and competition lowers supermarket margins.
11 For example, supermarkets primarily servicing lower income groups hold relatively low stocks of
barn-lay and free-range eggs.
IMPACTS ON THE ACT
COMMUNITY
85
Table 6.8
Impacts of the ban by income quintile, 1993–94 prices
Lowest
20%
2nd
quintile
3rd
quintile
4th
quintile
Cost increase for pre-ban
consumers of battery
eggs ($)a
3.84
2.94
6.02
3.55
4.72
4.22
Cost decrease in barnlay eggs for existing preban purchasers ($)b
0.06
0.10
0.15
0.21
0.27
0.16
Net increase in costs ($)c
3.78
2.84
5.88
3.34
4.45
4.06
0.08
0.06
0.13
0.07
0.10
0.45
Costs as a share of
income (%)
0.028
0.010
0.013
0.005
0.004
0.008
Share of total cost
increase (%)
18.5
13.9
29.1
16.5
22.0
100.0
Total costs of ban ($m)
d
Top All house20%
holds
a The cost increase was calculated as:
C i = ∆P P × E i × (1 + ∆P P ε )
where i denotes the ith income group, ∆P/P is the proportional increase in the price of eggs (assumed to be
12.6 per cent at the time of the ban), E is the pre-ban expenditure on battery eggs and ε is the price elasticity
of demand for eggs (set at -0.2 on the basis of econometric estimates). The expenditure on battery eggs for
each income group had to be imputed. This was done in several stages. First, on a priori grounds we
assumed that the income elasticity for non-battery eggs is quite high — of the order of around 1.5, but
declining as income rises. This is supported qualitatively by Bennett (1998, p. 6) and Fearne and Lavelle
(1996) who show that animal welfare concerns are positively correlated with income. We assumed that nonbattery egg consumption of 2nd quintile households was 1.6 times that of the lowest quintile, of the 3rd was
1.5 times that of the 2nd, of the 4th was 1.4 times that of the 3rd and of the top quintile was 1.3 times that of
the 4th. Second, we obtained data on egg prices in 1993–94 from ABS Cat. No. 6403.0 (which records
average prices as $1.90 a dozen, which we take to be the battery egg price). Information on relative prices of
battery and non-battery eggs from the Australian Supermarket Institute and market share data from sub. 78
suggests that non-battery eggs (including barn-lay and free-range) were 32 per cent dearer than battery
eggs. Finally, this information was combined to derive the quantities of battery eggs consumed by each
income group.
b Consumption quantities of barn-lay eggs were assumed to be 30.9 per cent of non-battery eggs (as in sub.
78) for each income group. These eggs are projected to fall in price by about 7 per cent because of lowered
supermarket margins (see above main text), providing an income gain to current barn-lay egg consumers.
c The net cost is simply the cost from price increases faced by consumers of battery eggs less the cost
decreases faced by current consumers of barn-lay eggs.
d This is the aggregate cost of the ban for each group of households — using observed prices in 1993–94 —
in millions of dollars. Price increases since 1993–94 mean that the absolute costs of the ban will be greater
— but the issue here is to look at costs as a share of income (the penultimate row) and the distribution of the
costs among different households (the bottom row).
Source: Calculations made by the Commission using the ABS Household Expenditure Survey Unit Record
File.
86
BATTERY EGGS
Table 6.9
Net income effect of the ban as a share of income by household
type and income quintile, 1993–94
Net cost of the ban as a percentage of household income
Household type
Lowest
20%
2nd
quintile
3rd
quintile
4th
quintile
Couple only
0.046
0.007
0.017
0.005
0.002
0.007
Couples with children
0.038
0.011
0.017
0.006
0.005
0.008
One parent households
0.019
0.021
0.016
0.002
na
0.014
Lone person households
0.019
0.005
0.001
0.002
0.003
0.005
Other households
0.037
0.005
0.007
0.004
0.004
0.006
Total
0.028
0.010
0.013
0.005
0.004
0.008
Top All house20%
holds
a The calculations follow the procedures outlined in table 6.8. It is assumed that patterns of non-battery egg
consumption are determined by income quintile alone, and not by household type. Variations from this
assumption will make a negligible difference to the estimates.
na: not available due to the small sample size in this cell.
Source: Calculations made by the Commission using the ABS Household Expenditure Survey Unit Record
File.
6.6
Limitations of consumers’ apparently revealed
preferences when measuring costs
This section considers a range of information to try to assess the extent to which
ACT consumers may be willing to bear the additional costs associated with the ban.
A key question is the extent to which consumers’ preferences are fully revealed by
their existing egg purchasing patterns. Some submissions suggested that ACT
consumers are not greatly concerned about the battery cage system because
overwhelmingly they purchase battery eggs. For example, the AEIA (sub. 76, p. i)
said:
ACT consumers would be denied the freedom to choose to purchase caged eggs,
although approximately 90 per cent of all eggs consumed in the ACT are thought to be
derived from the caged system. This is an overwhelming vote of confidence by those
consumers and occurs despite a wide range of options available in terms of the source
and type of eggs available for consumption.
IMPACTS ON THE ACT
COMMUNITY
87
However, there may be a variety of reasons why existing purchasing patterns may
not be a good guide to consumer preferences, namely:
•
information deficiencies;
•
externalities; and
•
other obstacles.
These are examined in turn.
Is information provision adequate?
If consumers are ill-informed about the different types of eggs, they may make
purchases which do not really accord with their fundamental preferences (eg buy a
pack of eggs assuming that they are non-battery cage eggs, when they are not).
Their implicit ‘vote’ for battery eggs is, in this case, quite accidental. They may, in
fact, be willing to pay more for non-battery eggs than battery eggs — the ‘costs’ of
the ban for such people are actually economic gains.
There are two aspects of information provision which are relevant:
•
consumers may lack information about the different ways eggs are produced and
their impacts on animal welfare; and
•
they may be unable in a retail outlet to distinguish between eggs produced by
different modes (the ‘labelling’ problem).
Information on egg production systems
While MORI (1998) has conducted a recent survey of awareness of the different
forms of production systems in the European Union12, the Commission is unaware
of any similar survey for Australia. Nor has any survey fully probed the extent of
community perceptions (and understanding) of the welfare impacts of each of the
different housing systems, with the possible exception of Rogers et al (1989) for the
UK.13 Their study was based on a small sample of people, split into three groups:
agriculturalists, welfarists and the general public. Respondents completed a
questionnaire on their perceptions of the impacts on relative hen welfare after
12 The poll suggested that virtually all British respondents were aware of free-range and battery
cage production, but less was known about deep litter and perchery/barn systems. In Germany, 78
per cent had heard of the battery system and 75 per cent of the deep litter system. In France,
knowledge of free-range and battery systems was higher than the alternatives. Italian respondents
had the lowest awareness of the different systems.
13 Cited in Appleby et al (1992, pp. 98-99).
88
BATTERY EGGS
watching a video of the relevant features of six housing systems (battery cages,
modified cages, perchery, deep litter, strawyard and free-range). Each group ranked
battery cages last and free-range first, although agriculturalists saw all systems as at
least adequate (figure 6.3).
Figure 6.3
Overall ratings given to different housing systems
Ideal
F
F
F
E
A: battery cages
B: modified cages
C: perchery
D: deep litter
E: covered strawyard
F: free range
B
C,D
A
C,D,E
E
B
C,D
A
Worst possible
A,B
Agriculturalists General public Welfarists
Data source: From Appleby et al (1992, p. 98) citing Rogers et al (1989).
In Australia, an AGB McNair Survey, held in March 1994, of the attitudes of 1087
randomly selected Australians, showed that a significant number of people were
aware that battery cage production involved relatively cramped conditions for birds,
so that there is at least a partial (if somewhat biased) public awareness of animal
welfare impacts in Australia. However, if results from the European MORI survey
are typical here, few people are aware of the barn-lay system, while most are aware
of free-range. The implications of these information deficiencies are twofold:
•
In some cases, adverse public perceptions of the cage system and positive
perceptions of the battery alternatives are not based on objective evidence. For
example, concerns about food safety in battery cages relative to non-battery
alternatives are misplaced (chapter 7). As well, all housing systems have some
adverse animal welfare impacts. There are grounds for providing objective
information to the public about the welfare and other relevant impacts of any
production system — which may entail greater disclosure of outcomes than is
currently routine (for example, in relation to mortality rates).
•
If the ban proceeds, it may be important to increase public knowledge about the
barn-lay system, which appears to be the appropriate successor to cages on
economic and animal welfare grounds.
IMPACTS ON THE ACT
COMMUNITY
89
Labelling
At the moment, information about the mode of production (as distinct from other
special features of the product, such as the grain type of the feed) is provided on the
some egg cartons. It either indicates that the eggs are produced by a method
endorsed by the RSPCA (currently only barn-lay eggs) or that they are free-range. If
the mode of production is not specified, it can be presumed that the eggs have been
produced using the battery cage method. The latter may be labelled as ‘farm fresh
eggs’, and some display drawings which may imply non-cage production to some
consumers. An important issue is, therefore, the extent to which consumers can
discriminate between different egg production systems at the supermarket.
Animals Australia (sub. 82, pp. 16–17) indicated that it had made several
(successful) representations before the Australian Competition and Consumer
Commission concerning misleading labelling, but noted that:
Unfortunately the accurate labelling and provision of information on hen housing has not
yet occurred in regard to battery-sourced eggs ... To our knowledge no battery egg
cartons marketed in Australia indicate that the eggs are from hens kept in cages.
The AGB McNair Survey for Australia appears to over-estimate free-range
consumption, which would be consistent with some degree of consumer inability to
discriminate between different eggs.
European surveys also suggest that consumers are confused about the production
system implied by a label. For example, in the UK, a NOP (1997) survey held in
August and September 1997 suggested that 35.5 per cent of people mistakenly
assumed that eggs with a ‘fresh eggs’ label came from a free-range system, while
another 12 per cent were unable to deduce the source of the eggs. The UK Farm
Animal Welfare Council (1997, p. 29) recommended that it be compulsory for
British eggs to be labelled according to their system of production.
It is highly probable that some ACT consumers are also unaware that they are
buying eggs from the battery cage system.
Are there externalities?
People may care not just about their own consumption of eggs — and what that
entails for hen welfare — but also about other people’s egg consumption. For
example, a person who dislikes the conditions under which battery eggs are
produced may feel adversely affected if other people consume such eggs. This is the
economic problem of ‘externalities’. A ban, by removing the ‘externality’, makes
that person better off.
90
BATTERY EGGS
Bennett (1997b, p. 243) argues that:
The negative animal welfare externalities (animal suffering) associated with the
production of animal products and services do not explicitly feature in the markets for
animal products and so remain as hidden costs. An important aspect of these
externalities is that the preferences of people not buying goods in markets are not
considered. For example, consider the market for veal produced by keeping calves in
crates. The preferences of people that consume veal are recorded in terms of the
quantity they are willing to buy and the price they are willing to pay. But there may be
people in society [who do not eat veal] who experience considerable disquiet about the
use of calves in this way which reduces their (human) welfare and so imposes a cost on
them (and hence, within a cost-benefit analysis framework, on society). These people
have no way of expressing their wants through the market system.
It is even possible that some people who knowingly buy battery eggs would prefer
to see a ban. They may continue to buy battery eggs because they reason that their
own purchasing decisions make almost no difference to animal welfare, whereas
coordinated purchasing decisions (via a ban) do so.
Of course, just because some people dislike battery cage farming is not sufficient
grounds for a ban. But it does mean that consumer preferences, as reflected in the
purchases of different sorts of eggs, will not give a full guide to people’s valuation
of hen welfare — and that hen welfare outcomes under a free market system are
unlikely to be optimal.
A critical question for policy is how big are these externalities? Unfortunately,
measurement of externalities, when they are in this form, is very difficult. Consumer
surveys which attempt to value such externalities by asking people hypothetical
questions about their willingness to pay — so-called contingent valuation — suffer
from a range of limitations (see, for example, Hausman 1993). Even so, contingent
valuation remains the most widely used method for trying to estimate the values of
externalities and public goods.
However, no appropriate contingent valuation exercise has been conducted in
Australia relating to a ban on battery cages. There has, however, been a contingent
valuation survey conducted in the UK (box 6.1)14 and a more general consumer
survey relating to hen welfare in Australia (box 6.2). 15
14There are a number of other British surveys with similar qualitative outcomes (Fearne and Lavelle
1996; NOP 1997 and MORI 1997).
15 Bowling (1989, p. 79) describes an earlier survey conducted in Australia in 1983 by the National
Farmer magazine, which showed that the majority of people disliked the thought of eggs being
produced by battery hens.
IMPACTS ON THE ACT
COMMUNITY
91
The evidence from these surveys — while obviously subject to significant
drawbacks — suggests that there is a degree of community unease about the
conditions facing battery hens. Such views suggest that at least some of the apparent
costs of the ban may ‘buy’ corresponding consumer benefits (both in the ACT and
among others in Australia who dislike the battery system). If community unease
about battery caged hens is combined with ignorance about which eggs are
produced under which system, or if people do not act because they feel their own
isolated contribution is too small, then existing patterns of purchases may not reveal
people’s true preferences.
On the other side of the coin, while there are benefits to some consumers from a
ban, stemming from moral convictions about animal welfare, it is possible that:
•
there are also costs to some consumers from the ban relating to moral
convictions about the freedom of individuals to choose, and exercise their
freedom;
•
some consumers with a hostile perception of the battery cage system are unaware
of the welfare disadvantages of the alternative housing systems, and the
complexities of the welfare trade-offs between the two. Some consumers, when
made aware of these complexities, may not consider the welfare gains to hens
worth the price; and
•
some consumers may view the overall hen welfare benefits from a ban to be low
because the measure only relates to the ACT, which accounts for about 2 per
cent of the total Australian egg market. On the other hand, such consumers may
also view a local ban as a positive start of a wider process of legislative change
relating to hens.
Are there other obstacles to consumer choice?
There may be a number of other obstacles to consumers making choices about
purchasing eggs in a way that reflects their genuine preference (both for eggs and
hen welfare).
One obstacle may be lack of easy access to non-battery eggs. This is unlikely to be a
significant problem now that demand for non-battery eggs has risen. The
Commission undertook a survey of a range of supermarkets in the ACT (appendix
E). This showed that free-range and barn-lay eggs were widely available. Of course,
some consumers looking for particular carton and eggs sizes of non-battery eggs
will not find them in their local shop, and this may be a factor in their purchasing
decision.
92
BATTERY EGGS
Box 6.1
A UK survey of consumer valuation of hen welfare
Bennett (1996, 1997ab, 1998) received responses on hen welfare from 591 British households
during 1995–96. Consumers were asked to give a rating on the acceptability of battery caged
hens, with 1 being completely unacceptable and 10 being completely acceptable. Fifty eight
per cent of respondents gave a rating of one, and 76 per cent a rating less than 5. Just under
80 per cent of respondents supported legislation to phase out the use of cages in egg
production in the European Union by 2005. On the other hand, 1.5 per cent of respondents
objected to the legislation.
Bennett also assessed people’s willingness to pay to support legislation to ban battery cages.
He found that, on average, people were willing to pay about 43 pence (about $1.20) more for a
dozen eggs to support the legislation, or about a 30 per cent increase in the retail price of eggs.
He found some evidence of biases in the responses which overstate people’s willingness to
pay, and derived an adjusted mean willingness to pay of 38 pence.
Bennett also found support for the notion that part of people’s willingness to pay for a ban was
the satisfaction of knowing that other people would not be reducing hen welfare by consuming
battery eggs — which accords with the externality argument. Thirty two per cent of respondents
gave this a rating of 10 — “very true of their feelings”’ and 72 per cent gave it a rating of 5 or
more.
While Bennett’s results are interesting, there are a number of limitations:
•
the survey had a 30 per cent response rate, which raises the problem of non-response bias.
It seems probable that people who are indifferent to animal welfare would be less likely to
respond, and that, therefore, the responses exaggerate concerns about animal welfare
among the general population.
•
there are (as noted in the main text) methodological difficulties with contingent valuation
which suggest cautious interpretation, as Bennett also acknowledges (1998, p. 9); and
•
the question arises as to whether a survey of British consumer sentiments is relevant to
Australia. While the exact numbers would have limited relevance, similarities in cultural
beliefs suggest that a common qualitative pattern of results may be replicated.
Source: Bennett (1996, 1997ab, 1998).
Another potential obstacle may be people’s inability to effectively voice preferences
because they are buying products which incorporate eggs, such as commercial cakes
or a fast-food hamburger. Clearly, it would be possible for such businesses to offer
customers a non-battery alternative, but this is unlikely if demand for the alternative
is low, or if it is difficult for the customer to tell whether the ‘right’ egg has indeed
been used. However, a ban may not make a substantial difference to this problem,
because many businesses will sell imported products which incorporate egg pulp
from battery hens.
IMPACTS ON THE ACT
COMMUNITY
93
Box 6.2
AGB McNair survey of attitudes to hen welfare
An AGB McNair Survey into the attitudes of a 1087 randomly selected Australians to
egg purchases and hen welfare was conducted in March 1994 as part of a routine
omnibus survey. The fact that it was an omnibus survey (in which people are asked a
whole range of often unrelated questions) reduces the risk of non-response bias. 16
Forty one per cent of respondents purchased free-range eggs, which does not accord
with other market share data.17 This implies either a biased sample (which is unlikely
given the survey design) or some degree of misunderstanding or deception by
respondents. Misunderstanding might point to problems with consumer information,
while deception suggests a degree of stigma attached to admitting to the purchase of
battery eggs. Thirty seven per cent of respondents said they bought battery eggs and
27 per cent said they did not know (most of whom presumably are buying battery
eggs).
When asked whether they had any particular concerns about the conditions of battery
hens, 53 per cent of respondents nominated some concerns, 46 per cent had none
and 1 per cent did not state or know. Of those who were concerned, the most
common source of concern was a perception of cruelty (43 per cent of concerned
respondents and 23 per cent of all respondents) and a distaste for the cramped
conditions and/or a feeling that birds should have more space to move (41 per cent of
concerned respondents).
Thirty three per cent of respondents strongly agreed (a rating of 7) with the statement
that the conditions of battery hens are deplorable and that legislation should ban this
mode of production. A further 11 per cent gave a rating of 6 to the statement. Seven
per cent strongly disagreed with the statement (a rating of one).
About 33 per cent of people said they would be willing to pay more than 50 cents
more per dozen to fund the cost increases required to provide hens with more room to
move around.
Source: AGB McNair (1994).
16 Even so, some aspects of the survey may engender bias. For example, people were asked to rate
their degree of agreement with the statement made by some people that “The conditions that
battery hens are kept in are deplorable and that there should be laws to stop it”. Such questions can
‘condition’ responses.
17 The data could be at least partly reconciled if people who bought free-range tended to buy
smaller quantities in any given period, if people recorded that they purchased free-range eggs when
they sometimes bought free-range and sometimes bought battery cage eggs, and if backyard freerange production was included.
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BATTERY EGGS
6.7
Stepping outside individual consumer preferences
There are two ways of looking at consumers. One way is to look at them
individually — with their distinctive preferences — and determine the impacts of
the proposed measures on them as a whole by adding up individual impacts. This
approach, adopted above, takes into account the value of battery cage alternatives
revealed by individuals (whether motivated by ethics, aesthetics or other
considerations).
A second approach uses other methods to see what the ‘community’ values. This
may differ from the aggregate of consumer preferences because what any given
individual reveals may be in breach of community or other ethical standards. For
example, a man may be beating his dog next door, and may consider that this is
right or (if sadistic) even pleasurable. His neighbours might not know or even care
that he is beating his dog — so they don’t suffer ‘psychic’ damage from his
behaviour. A ‘preference-based’ benchmark for evaluating his behaviour might
conclude that nothing should be done to stop the beating since he is revealing his
preferences and not imposing any ‘costs’ on the neighbours. But many people will
feel unhappy with this conclusion.
First, they will say that the ‘community’ has ethical standards which provides
guidance about what is right. Many people might not observe those standards (eg by
stealing, acts of cruelty, being inconsiderate, beating their spouses or lying), but the
community does not defer to their individual preferences.
Second, the context in which ethical preferences are elicited makes a difference. In
the case of battery eggs, people may shop one way (with their consumer hat on) but
vote another way (with their moral or political hat on). It is important to take note of
both sets of preferences when trying to make judgements about what people want.
Third, some people argue that animals have rights too. They do so for several
reasons. It could be argued that not giving animals rights leads to standards of
animal care which are harmful to people (that is, cruelty to animals psychologically
hurts people too). It could also be argued that animals have rights which are quite
independent from the human impacts or perceptions of animal welfare. How
extensive these rights are, and how they are traded-off, if at all, across species is a
very difficult issue. For example, do animals have the right to avoid cruelty, or do
they have more profound rights, such as the right to express all their natural
capabilities?
IMPACTS ON THE ACT
COMMUNITY
95
Singer (1995, p. 19), for example, argues that the fact that animals share some key
attributes with humans defines some rights:
To avoid speciesism we must allow that beings who are similar in all relevant aspects
[our emphasis] have a similar right to life — and mere membership in our own biological
species cannot be a morally relevant criterion for this right. Within these limits we could
still hold, for instance, that it is worse to kill a normal adult human, with a capacity for
self-awareness and the ability to plan for the future and have meaningful relations with
others, than it is to kill a mouse, which presumably does not share all of these
characteristics; or we may appeal to the close family and other personalities that humans
have but mice do not have to the same degree; or we might think that it is the
consequences for other humans, who will be put in fear of their own lives, that makes
the crucial difference; or we might think it is some contribution of these factors, or other
factors altogether.
Whatever criteria we choose, however, we will have to admit that they do not follow
precisely the boundary of own species. We may legitimately hold that there are some
features of certain beings that make their lives more valuable than those of other beings;
but there will surely be some nonhuman animals whose lives, by any standards, are more
valuable than the lives of some humans.
However, given the enormous heterogeneity in the expression and interpretation of
ethical standards, how can they be a guide to whether a ban on battery caged hens is
right (or in the public interest)? Almost any conceivable action could be deemed
unethical using some standard. To be useful for policy, there has to be some ability
to discriminate between competing ethical claims. For example:
•
How does one weigh up the ethical value of freedom and choice by humans, and
the ethical requirement to care appropriately for animals?
•
What does an ethical concern for animals entail?
There are several pointers to standards with a broad public appeal. First, the
community may have expressed its view as part of the political process, as for
example, in the Swiss plebiscite on keeping hens in battery cages (see appendix C),
or the decision by elected representatives, in the case of the ACT Legislative
Assembly.
Second, there may be broad community standards which may be thought to apply:
•
96
One relevant standard is the imperative not to be cruel. If the battery cage system
was perceived to be cruel by many people, then it would be consistent with our
general ethical standards to ban production using this method. However, it
should be emphasised that people making a judgment of cruelty should indicate
on what grounds cruelty is taking place, and whether the alternative system is
free of that cruelty. For example, many people might see beak trimming as a
cruel part of the life of a battery hen. However, it is just as much a feature of the
BATTERY EGGS
life of barn-lay and free-range hens, and cannot therefore constitute logical
grounds for a ban on the battery cage system.
•
The moral standards which underlie human rights may logically extend in some
cases and in some ways to animals (as maintained by Singer (1995)).
In summary, the ethical dimensions of the proposed animal welfare measures
suggest that policymakers have to consider social norms as well as individual
preferences when determining policy that is in the ‘public benefit’.
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97
7
Other issues
7.1
Introduction
The guidelines applying to public benefit tests set out in the Competition Principles
Agreement and the terms of reference for this study indicate the need to examine
factors beyond those affecting hen welfare, consumers and the egg industry itself.
The following three sections of this chapter look at some of those factors —
namely, consumer health, environmental and occupational health and safety issues.
A key factor bearing on the discussion about hen welfare is also relevant to these
issues. More specifically, the competency of management — rather than the nature
of the egg production system — is often the major factor influencing the
performance of egg producers. Thus, poor outcomes are far less likely in wellmanaged establishments, irrespective of the egg production method employed.
Indeed, some of the consumer health, environmental and occupational health and
safety concerns identified in this chapter may only materialise on relatively rare
occasions where management practices are ‘bad’. In these circumstances, it is most
appropriate to stand aside from management practices and focus on the potential for
these problems to develop in each of the major egg production systems (ie the
relative risks attached to each system).
The final part of this chapter (section 7.5) examines some cost factors —
administration, enforcement and compliance costs associated with the ACT
legislative amendments.
7.2
Human health
The contents of an egg would appear to be well protected from infection and disease
by its shell. However, the shell is porous. Hence, there is a possibility that bacteria
and viruses can pass through the shell and enter the egg. This gives rise to some
human health issues, the most significant of which is Salmonella.
Currently, Australian eggs are free from the more severe strain of the bacterium,
Salmonella enteritidis, but it may present a future health risk to Australians. US
OTHER ISSUES
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experience suggests that Salmonella enteritidis requires medical care in 6 per cent
of cases, and results in death in one in every two thousand infected people (Hoffert
1998).
There are two transmission routes for egg-associated salmonellosis, with differing
implications for risk management and egg production systems:
•
Most types of Salmonella live in the intestinal tracts of hens and can be
transmitted to humans through faecal contamination of the egg shell. The risk
can be reduced by minimising contact between eggs and hen faeces. This can be
fairly easily achieved in a battery cage system, where the egg is separated from
the hen immediately after is it laid. This is not necessarily the case with barn-lay
and free-range systems. Eggs produced in these systems can come into contact
with faecal material in nests. Nonetheless, normal good management practices
can reduce the risk of contamination. In this context, the AEIA claimed:
The risks of contamination arising from Salmonella are considered to be greater in floor
based systems than the cage system. ... The risk can be overcome through strategic
placement of nest boxes and regular replacement of litter material. (sub. 76, p. 16)
As well, clearly dirty eggs will typically not be sold as shell eggs, but
powdered or pulped and pasteurised, again limiting the risks.
•
Salmonella infection can also infect the ovaries of apparently healthy looking
hens and contaminate the eggs before the shells are formed. This is now regarded
as the prime mechanism for infection in the US (American Centre for Disease
Control, 1998). Control of faecal material on eggs clearly does not remedy this
problem — and therefore confers no advantage to battery eggs over alternative
systems for management of this source of the infection. A range of preventative
measures, such as adding lactose to drinking water, can help build resistance in
hens to Salmonella enteritidis infection (Barnett and Newman 1997) and is
equally applicable to all production systems. Similarly, recent technical
innovations, such as pasteurisation of unbroken shell eggs, vaccination and new
pharmaceutical approaches, can also be used to manage the risks for all
production systems (Hoffert 1998).
Other human health concerns relate to antibiotics and pesticides. For instance, some
participants expressed concern about the likelihood that antibiotics fed to hens
would contaminate the egg and lead to human health consequences. Perceptions of
whether this would be mainly a problem in battery cage systems or in alternative
production systems varied. For example, the AEIA stated:
Because there is greater reliance on the use of antibiotics as a preventive tool in floor
[barn-lay and free-range] systems, eggs from such systems are also prone to contain
higher, but still generally relatively low levels, of pesticidessic.].
[
(sub. 76, p. 17)
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BATTERY EGGS
On the other hand, a number of submissions (subs. 29, 33, 45, 77 and 86) alleged
antibiotic contamination was a significant risk in battery eggs. For example, Animal
Liberation stated:
... there is no question of the relationship between the high level of physical and
emotional stress in battery hens and the routine dosing of battery hens with antibiotics ...
Hens who are routinely dosed with antibiotics pass those antibiotics on to consumers in
their eggs. ... In all intensive egg production systems, there are human health concerns if
hormones are fed to hens to enhance egg production. ... We do not know whether
Parkwood hens are subjected to any hormone treatment to enhance egg production.
However we understand that the practice is not totally foreign to battery egg producers.
(sub. 33, pp. 12–13)
A submission on this issue received from the National Registration Authority for
Agricultural and Veterinary Chemicals (NRAAVC) clarified the use of antibiotics
and growth stimulants for egg laying hens in Australia:
Antibiotic growth promoters are not likely to be used in the egg industry. The major
growth promoters avoparcin, virginiamycin and zinc bacitracin are not registered for use
in egg laying birds. ... Over the years numerous poultry vaccines have been developed to
prevent disease. Antibiotics are only used in the egg industry in the unfortunate
occurrence of an outbreak of disease. (sub. 34, p. 1)
The NRAAVC indicated that a number of antibacterials are administered in feed or
water as therapeutics during disease outbreaks, or in some cases as a preventative
measure. However, their administration is not routine. The Commission has seen no
credible evidence to suggest that the use of antibacterials is greater in battery cages,
or that existing levels of use pose threats to humans.
Appropriate farm, transport, storage and retail management practices, rather than the
type of production system, appear to be the key means of minimising human health
risks associated with egg consumption. The risks are low in all egg production
systems. However, what risks there are, are probably higher in non-battery farms
(ARMC 1994, p. 140).
It should also be noted that retailers and egg producers have strong incentives to
avoid any production system which has clear adverse impacts on human health. All
three commercial systems are used in Australia with official sanction and the
implicit endorsement of producer bodies and retailers.
The Commission does not consider human health concerns can form a basis for
deeming any production system more desirable than others.
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7.3
Environmental matters
Possible environmental concerns relate to land degradation, pollution of ground and
surface waters, dust, waste disposal and odour:
•
Land degradation could, in principle, occur in free-range systems through overgrazing leading to denudation of ground cover. Land degradation could also
occur if there was nitrate leaching of the soil as a result of hen faeces left on the
ground. However, in practice, normal management practices (eg rotating stock
between paddocks and avoiding over-stocking) will usually prevent the
occurrence of such problems.
•
Pollution of ground and surface waters is clearly more of a problem with freerange production where hen manure can enter water ways during heavy rain.
Any denuding of the bird’s range areas clearly adds to this problem.
•
Dust could, in some circumstances, present environmental problems in freerange systems if the ground becomes sufficiently denuded. (In deep litter
systems, dust can also cause respiratory problems for hens and, for employees,
may pose an occupational health problem (see below).)
•
Waste disposal is not a serious problem in caged systems. As poultry manure is
in demand as a fertiliser, it can usually be sold. Those egg producers that engage
in other farming activities have some scope to use the manure to improve their
pasture. However, as discussed above, disposal of manure is more difficult for
free-range farms and barn producers as their birds’ manure is not as readily
disposed of as fertiliser.
•
Odour could, at times, create a problem (eg the AEIA suggests a possibility of
odour during wet weather), but the limited information available to the
Commission suggests that this is unlikely to represent a serious concern.
7.4
Occupational Health and Safety
The major occupational health and safety concern relates to possible ammonia and
dust-related problems in deep litter systems.
Battery cage systems typically have concrete floors, no litter and, as a result,
relatively low dust levels. However, submissions to this study and other available
information (eg Temple 1994 and Appleby 1992) suggest that there are higher levels
of dust (and ammonia) present in systems with litter — such as barn-lay. For
example, the Swiss Society for the Protection of Animals (1994, p. 31) noted that
Swiss non-battery housing had higher dust levels and, as a consequence, higher
102
BATTERY EGGS
germ and other micro-organism counts.1 Similarly, von Wachenfelt (1993) in the
case of Sweden, and Groot, Koerkamp and Drost (1993) for the Netherlands, found
concentrations of ammonia and dust levels higher in alternative non-cage systems.
As Barnett and Newman (1997, p. 395) sum up:
There seems to be widespread agreement that dust levels and ammonia concentrations
(and possible human pathogens such as fungi, bacteria and endotoxins) are generally
higher in non-cage systems ...
Ionisers, foggers, litter replacement and other management practices can lower dust
and ammonia levels (Barnett and Newman 1997, p. 395). Automatic egg collection
systems can reduce worker exposure and face masks can act as filters. The
Commission is aware of no evidence that any system of commercial egg production
— caged, free-range or barn — poses significant occupational health and safety
risks.
7.5
Administration, enforcement and compliance costs
The proposed ban and the associated labelling requirements will entail some
additional administration, enforcement and compliance costs. Some of the costs are
‘one-off’ implementation costs, while others are ongoing costs.
Additional costs stemming from the ban
Establishment costs would include the cost of preparing the relevant legislation (eg
drafting costs) and the costs associated in obtaining an exemption from the Mutual
Recognition Act. There would also be costs involved in informing the local
community about the ban and its implications for egg prices at the time the ban
came into force (ie six years after an exemption to the Mutual Recognition Act is
gained).
The ACT Government provided some information and estimates about additional
ongoing costs it faces. These include additional inspection costs should Parkwood
convert to non-battery egg production. Information was provided for two scenarios:
•
Parkwood converts to an aviary or barn system capable of accommodating its
current stock levels. The Government estimates that this would require 44 full
day inspections per year (up from 2 half-day inspections for the existing battery
cage facility), with additional inspection costs amounting to around $20 000 per
1 However, the same publication also notes that dust (and therefore micro-organism levels) can be
reduced by frequent changes of litter, having fine sand for dust bathing and the use of water
atomisers.
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annum. According to the ACT Government, this would require extra resourcing
for the ACT Government Veterinarian.
•
Parkwood converts only its existing sheds to an aviary or barn style, providing
housing for 70 000 hens — about one-third of the existing number. This is
estimated to increase annual inspections to 14 full day inspections per year, with
additional costs in the order of $6 000.
On the other hand, if the ban is implemented and Parkwood ceases business in the
ACT, these estimates imply cost savings of around $450.
If implementation of the ban proceeds, enforcement procedures will need to be put
in place to minimise the possibility that battery eggs will be misrepresented and sold
in the ACT market as barn-lay or free-range eggs. This may require random
inspections and/or audits of egg suppliers.
Compliance costs borne by producers (eg capital losses) are addressed in chapter 5.
Additional costs associated with the labelling requirements
The ACT Government indicated that additional one-off costs would include:
•
preparing the regulation to create the prescribed expressions to be used on egg
cartons (salary costs of $6 500 or more);
•
preparing an information pamphlet ($100); and
•
advertising in newspapers ($250 or more).
The Government would also face some enforcement costs (ie ensuring that eggs are
labelled in accord with the regulation).
Egg suppliers would have to label egg cartons to indicate the manner in which eggs
have been produced. They may also wish to label egg cartons destined for other
markets differently (eg to exclude the prescribed expressions required for eggs sold
in the ACT). However, in view of the quite extensive labelling that currently exists
on non-battery eggs, it is unlikely that this would impose significant extra costs on
producers.
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7.6
Summing up
On the basis of the available evidence, it seems unlikely that any of the major egg
production systems currently used in Australia — battery cage, barn-lay and freerange systems — would, in the normal course of events, lead to any human health,
environmental or occupational health and safety problems. It appears that any
problems arising in these areas are more likely to reflect poor management which, in
turn, could be associated with any type of egg production system.
While the issue is not clear cut, the balance of information suggest that the risk of a
problem arising in these areas, albeit minor, is higher with barn-lay and free-range
systems than it is with battery cage systems. Nonetheless, in the Commission’s
view, the level of risk is clearly acceptable given the present low incidence of
recorded problems relating to human health, environmental and occupational health
and safety.
If the ban and the associated labelling requirements are implemented, there would
be some increase in administration and enforcement costs borne by the ACT
Government. If Parkwood acts in accord with its current plans and ceases
production in the ACT, enforcement would probably represent the largest cost.
Although it is not clear how big this would be, the Commission considers it would
be small relative to the costs borne by consumers (chapter 6).
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8
Policy options
8.1
Introduction
The ACT legislation seeks to improve hen welfare by banning the production and
sale of battery hen eggs in the Territory and introducing complementary labelling
requirements.
Assessing hen welfare is inherently difficult. Even experts in the field disagree on
some important aspects, although it is generally accepted that, in the context of hen
welfare, all commercial egg production systems suffer from some shortcomings.
Drawing on expert studies that provide sufficient information to assess the rigour of
their analytical framework and associated empirical work, the Commission has
concluded that, on balance, the ban is likely to lead to some improvement in hen
welfare, especially in the longer run as new techniques are developed to address
some of the disadvantages of non-battery systems. This largely reflects the
importance that animal scientists and other experts place on the capacity of hens to
engage in certain behaviours that are not possible in battery cages — such as
nesting, dust-bathing and perching.
There are, however, additional matters which the Commission must take into
account for the purposes of a public benefit test. In particular, there is a need to
consider whether there are other measures that could more efficiently improve hen
welfare, and whether the benefits to the community stemming from improved hen
welfare outweigh the costs. These matters are discussed below.
8.2
Alternative policy options
The Commission has considered the effectiveness of a number of alternative
measures to the proposed ban. Some seek to constrain the types of eggs that can be
supplied to the ACT, while others are intended to change the pattern of demand for
eggs in the ACT. These options, which can be grouped under four broad headings,
relate to:
•
improving cage systems;
POLICY OPTIONS
107
•
improving management practices;
•
taxing or subsidising battery egg production or consumption; and
•
improving information to facilitate consumer choice.
Improving cage systems
There is some evidence to suggest that cages modified to meet some key
behavioural needs of hens will improve welfare. For example, Temple (1994, p. 59)
said that:
... modifications suggested to the standard cage systems ... offer a possible long-term
solution. They seem to retain the advantages of the present cage systems while
addressing all the perceived difficulties, except large-scale locomotion.
Modifications that could improve animal welfare include:
•
the provision of perches in cages to improve bone strength and tail feathers (but
these changes would not affect the level of bird stress, weight or immune system
(Barnett, Glatz, Newman and Cronin, 1997a)); and
•
solid sided cages to reduce the level of bird stress, improve feather cover and
decrease bird pecking (Barnett, Glatz, Newman and Cronin, 1997b). (However,
Glatz and Barnett (1996) report more dirty and broken eggs and a higher
mortality rate (in a hot weather period), suggesting that further design
modification may be needed.)
In these circumstances, one option would involve permitting the sale in the ACT of
only those battery eggs produced in modified battery cage systems. This could
involve a government inspection and certification process to identify producers
using suitably modified cage systems. Like the proposed ban, the effective
implementation of this option (and the following option) would require the ACT
Government to gain an exemption from the Mutual Recognition Act to prevent eggs
produced in unmodified battery cage systems by interstate suppliers being sold in
the ACT.
This option could improve hen welfare. However, modifications which allow for all
of the desired behavioural expressions, as well as a greater capacity for exercise and
wing stretching, come at a cost which approaches that of non-battery alternatives.
On the other hand, less extensive modifications — such as a facility for a perch —
come at a relatively minor cost for producers (and consumers). Administrative costs
associated with this option would be relatively modest. However, a major drawback
is that it would not address the fundamental concern underlying the ACT legislative
amendments — high stocking rates in battery cages.
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Improving management practices
The Animal Welfare Act does not specifically cover the welfare of layer hens — it
relates to all animals, including birds kept for commercial purposes or as domestic
pets. Standards for management of layer hens are set out in the Code of Practice for
Domestic Poultry. The Code, which is not legally enforceable, specifies certain
actions that should be followed by egg producers (eg the prompt removal of dead
and sick birds), but does not prohibit the keeping of hens in battery cages.
In these circumstances, another alternative — which could be coupled with the
option outlined above — would be to modify the current Code of Practice. For
example, it would be possible to specify more frequent surveillance of birds to
facilitate earlier detection and retrieval of sick and dead birds. Subsequently, sales
of battery eggs in the ACT could be permitted, but only by producers that comply
with the higher animal husbandry and farm management standards specified in the
modified Code.
While this alternative would produce some benefits, it also fails to deal with any of
the key concerns about battery cages relating to the behavioural and physical
freedom of hens.
Further modifications to the Code to exclude the supply of all battery hen eggs to
the ACT could be contemplated but, given the Government’s limited enforcement
powers, this would appear to be less effective than a legislative (and legally
enforceable) ban on battery eggs.
Taxation/subsidy options
An alternative to specifying changes to egg production systems and management
practices would be for the ACT Government to modify the pattern of demand for
eggs by changing the selling price of eggs produced by battery hens relative to eggs
produced using other systems (eg increase the relative price of battery hen eggs to
provide an incentive for higher consumption of other types of eggs). The effect of
this on the pattern of demand would depend largely on the extent of the price
change, as well as the responses of both producers and consumers. However, if it
resulted in battery hen eggs becoming more expensive than other eggs sold in the
ACT, this alternative could have similar effects on the sale of battery hen eggs as
those resulting from the proposed ban.
In principle, this alternative could involve a tax or subsidy on either production or
consumption of battery hen eggs. However, legal and practical constraints
effectively eliminate tax options. For example, the ACT clearly does not have the
POLICY OPTIONS
109
legal capacity to tax the production of battery eggs — or an input into egg
production — that takes place in New South Wales. And, following a recent High
Court decision that interpreted the meaning of the term ‘excise duties’ (the Walter
Hammond case), it appears that, under the Constitution, the States and Territories
do not have the power to levy a tax on the sale of a new (as opposed to second
hand) commodity in their own jurisdiction. These powers essentially reside with the
Commonwealth.
The subsidy option does not suffer from the same legal shortcomings. In principle, it
would be feasible to subsidise ACT consumption of non-battery eggs to induce a
switch in demand away from battery eggs and, thus, approximate the effects of the
proposed ban on the sale of battery eggs. In practice, the subsidy might be best paid
directly to ACT egg retailers.
Unlike the proposed ban, a subsidy would not necessarily restrict consumer choice
— battery eggs would still be available provided there was sufficient demand. An
attraction of this option is that the cost of the government action would be borne by
all ACT taxpayers, not just by consumers of eggs. Given that the decision to
introduce the ban reflects a community-wide objective determined by the ACT
Legislative Assembly, this arguably represents a more equitable sharing of the cost
burden. A subsidy, being a ‘line item’ in the Government budget, would also be
more transparent — the amount paid by ACT taxpayers to improve hen welfare
(ignoring additional administration costs and the like) would be reported annually,
rather than being ‘disguised’ in higher average egg prices paid by consumers.
As with most subsidies, targeting of the subsidy would present some problems.
More specifically, the subsidy would have to be paid to all consumers of nonbattery eggs. As a result, consumers who normally buy barn-lay or free-range eggs
would receive something akin to a windfall gain (ie they would be subsidised by the
ACT community for doing what they would normally do — that is, buy non-battery
eggs). This problem would escalate over time if, as most expect, the proportion of
the market supplied by non-battery eggs, in the absence of any government
intervention, increases of its own accord (see below).
One drawback of this option is uncertainty about both the size of the subsidy per
egg required, and uncertainty about overall budgetary outlays. For example, to
reduce demand for battery hen eggs to minimal levels, the subsidy might need to be
of a magnitude sufficient to drop the price of non-battery eggs to a level a little
below prevailing battery egg prices. On the other hand, it may well be that a
substantial reduction in the current retail margin — reducing it from existing levels
to (say) 20 cents per dozen — may produce a similar outcome (especially if
comprehensive labelling requirements are in place). Some empirical work (to
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BATTERY EGGS
estimate relevant price cross-elasticities) would be needed to shed some light on this
issue.1
There could be some significant enforcement problems. In principle, the need to
distinguish between battery hen and other eggs is a problem no different from the
identification problem associated with implementing the proposed ban. However,
with the subsidy option, the problem would be compounded because the number of
egg sellers greatly outnumbers the number of egg producers. In addition, a system
(and an associated audit process) would need to be established to receive and record
sellers’ sales volumes of non-battery eggs, and remit on a regular basis (eg monthly)
the subsidy payment owing to each seller. This would, of course, also impose
compliance costs on sellers.
Improving information to facilitate choice
In the ACT and Australia generally, there has been a significant increase in demand
for non-battery eggs. Whereas a decade ago commercial egg supplies were nearly all
sourced from hens housed in battery cage systems, eggs produced in non-cage
systems (mainly barn-lay and free-range) have now gained a significant share of the
market. In the ACT, barn-lay and free-range eggs are now estimated to represent
about 14 per cent of the volume of retail market supplies.
In this context, the RSPCA stated:
Since the launch of RSPCA [barn-lay] accredited eggs in Victoria and NSW over
eighteen months ago, sales have increased by over 300%. Coles supermarkets, the main
outlet for RSPCA accredited eggs in Victoria have stated that RSPCA-accredited eggs
are the fastest growing sales item on their shelves. (sub. 46, p. 8)
These developments are consistent with trends in some other developed countries.
For example, in Denmark, sales of non-battery eggs accounted for 25 per cent of the
market in 1995, but are expected to reach 40 per cent in 1998 (Bijleveld (1995)
cited in sub. 82).2,3 A survey of major UK supermarket chains undertaken by
Compassion in World Farming (CIWF) found that, in most chains, sales of non1 To estimate the total budget outlays, it would also need to be recognised that, as the average price
of eggs would fall, aggregate demand for eggs in the ACT may rise slightly. Some allowance
would also need to be made for increased purchases of non-battery eggs by consumers living in
Queanbeyan (and other areas adjacent to the ACT) who would normally pay significantly higher
prices for such eggs.
2 For the EU as a whole, the proportion of the market supplied by non-battery eggs in 1995 was
much lower — around 7 per cent. (sub. 82)
3 The increase in non-battery eggs production in Denmark was facilitated by government financial
incentives to assist producers to change production methods or, alternatively, exit the industry.
POLICY OPTIONS
111
battery eggs as a proportion of total battery egg sales were in the range of 20 – 40
per cent. Three of the chains reported a higher proportion, with one (Marks &
Spencer) reporting 100 per cent as a consequence of its decision not to stock battery
eggs (sub. 51, appendix 2).
Many who participated in this current study believe that the share of the Australian
egg market satisfied by non-battery eggs will continue to grow strongly. The growth
is seen as reflecting not only changed consumer preferences, but also the scope for
reductions in production costs (and prices) of non-battery eggs (mainly barn-lay)
relative to the cost of producing battery eggs. These cost reductions are seen as
resulting from improved management practices (particularly in barn systems which
are still relatively new to Australia), from further scale economies and through the
benefits of ongoing research and development (eg in breeding less aggressive hen
varieties to overcome pecking and other forms of aggressive behaviour which can be
a more significant problem in non-cage systems than in battery cage systems).
These trends form the basis for raising another policy option — allowing individual
consumers, through their purchasing decisions, to determine the appropriate
conditions in which layer hens should be kept. This does not imply the maintenance
of the status quo. For this to be a meaningful option, consumers would have to have
sufficient information available to enable them to make an informed choice. This
would require government action to provide the necessary information. As Bennett
(1995, p. 58) states:
The first [option] is to use the market mechanism and allow people to make an informed
choice about the products they consume. For this to work, consumers need to be wellinformed about the animal welfare characteristics of the products they purchase and
about alternative production practices and products. This would no doubt require
government intervention in the supply of information.
The form of information supplied to consumers would need to go well beyond
labelling — it would need to include detailed descriptions and analysis of the effects
on hen welfare of each of the major egg production systems.
However, to be fully effective, this option would also require the labelling of all egg
cartons to indicate the egg production method used. This would entail the ACT
Government gaining the unanimous support of Heads of Australian governments to
listing the labelling requirement as an exemption to the Mutual Recognition Act. If
this were not forthcoming, battery eggs from interstate suppliers would not have to
carry a label indicating how they were produced. However, to the extent that the
Government information campaign could convey the message to consumers that
“unlabelled eggs are battery eggs”, the adverse effects of failing to obtain an
exemption would be reduced.
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BATTERY EGGS
During the six year period proposed before the introduction of the ban, an active
information dissemination program would almost certainly accelerate the rate of
market penetration of non-battery eggs. It is, of course, exceedingly difficult to
estimate what the market share for non-battery eggs would be at the end of that
period (ie around 2004), but a share in the order of 25–50 per cent is plausible.
The major advantage of this option is that consumers would retain the capacity to
determine the type of egg (and the price) that best suits them. Hence, households
which were unwilling consumers of battery egg alternatives would not be burdened
with higher egg costs as they would be under the proposed ban. Adjustment costs
would be substantially reduced. Administration and compliance costs would be
relatively low, although there would be costs in assembling and disseminating the
information needed to facilitate informed decision making by consumers.
The most obvious shortcoming of this alternative is that it only partially satisfies the
ACT Legislative Assembly’s goal — sales of battery eggs in the ACT would be
significantly reduced, but they would still supply a considerable proportion of the
ACT market. The effectiveness of this option would clearly be linked to the impact
of the Government’s information campaign to increase consumer awareness
8.3
Weighing up the ACT proposals
As noted above, there is little agreement about the effects on animal welfare of
different egg production systems. However, based on the most authoritative studies
in this field, the Commission considers it likely that a move away from battery cage
systems towards alternative systems, such as barn-lay, would result in some
improvement in hen welfare, especially in the longer term as further research
reveals ways of reducing some of the disadvantages of alternative production
systems (chapter 6). Neither the extent of the improvement in hen welfare as a result
of the ban nor the benefits derived by the community are amenable to reliable
quantitative assessment.
The net employment effect on the national economy is likely to be negligible
(chapter 5). However, because alternative systems are more labour intensive than
the battery cage systems they would replace, there could be a minor increase in
employment in the industry. If Parkwood closes, (which, according to Bartter,
would be the case if the ban is implemented), jobs in the ACT would be transferred
interstate — predominantly to New South Wales.
The major economic costs would be reflected in higher ACT egg prices and
adjustment costs.
POLICY OPTIONS
113
The Commission estimates that retail prices for barn-lay eggs would be about 12 per
cent higher than battery eggs in the medium term and between 4.5 and 7 per cent
higher in the longer term (chapter 6). This increase would affect some commercial
users (eg restaurants and fast food outlets) as well as households. In the case of
households, the increase would be regressive — it would have a larger proportional
impact on low income households.
The constant amount of money (the ‘perpetuity’) which the ACT community would
need to save each year to pay for future price premiums on eggs is around $650 000.
Adjustment costs include the cost to society of the premature retirement of assets
and costs associated with job losses at Parkwood (47 according to Bartter). Of these,
the former is likely to be by far the more significant.
While some of Parkwood’s assets are readily saleable (eg equipment such as
tractors and generators), a substantial proportion of its assets are effectively
immobile and would become redundant once the ban was in place. Based on an
independent valuation supplied by Bartter, the economic loss to the national
economy is likely to be no more than $4.4 million (chapter 5). The perpetuity
needed to meet this is around $290 000 per annum.
There would also be some additional administration and enforcement costs. Some
would be one-off establishment costs and some would be on-going costs. These
costs are estimated to be minor relative to the consumer and adjustment costs
(chapter 7). If the ACT Government were to adopt some of the complementary
measures suggested by the Commission (chapter 4), some additional — albeit small
—costs would be incurred.
The introduction of the labelling requirement would benefit some consumers by
providing additional information upon which to base their choice of eggs. These
benefits would be greatest in the six-year transitional period leading up to the ban.
This is because most non-battery eggs already carry labelling indicating how they
have been produced. Thus, once battery eggs are not available in the ACT, the need
for a labelling requirement is not as great.
If the ACT does not apply for an exemption from the Mutual Recognition Act for
the labelling requirement, the benefits from labelling would be reduced because, in
the period prior to implementation of the ban, battery eggs from interstate would not
have to comply with the legislation.
Egg suppliers to the Canberra market already extensively label their egg cartons.
Consequently, even if they elect to sell eggs into other markets in different cartons
to those sold in the ACT, any extra cost is likely to be small.
114
BATTERY EGGS
8.4
Summing up
As noted in Chapter 6, Government involvement in determining regulations and
standards reflects, in part, disparities in the views of individuals. For example, some
may think it is acceptable for a twelve year old child to hold down a full time job
and drive a car on public roads. But these judgments violate community norms. In
the absence of government involvement, the welfare of the community as a whole
may be reduced. For these sorts of reasons, governments frequently act to protect
community interests and prescribe minimum standards to apply to all members of
the community.
Legislation put in place by all State and Territory governments to protect the
welfare of animals may be viewed in this light. In the main, this legislation is
generic in character.
The ACT amendments are supplementary to this generic legislation. They
specifically address a subset of one class of animal — layer hens that are housed in
battery cages.
Although animal welfare groups in many countries express concern about the
implications of battery cage systems for animal welfare, only one country —
Switzerland — has effectively banned egg production in battery cage systems.
However, a number of other European countries — such as the Netherlands,
Germany and Finland — have indicated a preference to ban battery cage systems.
(The difficulties faced by individual EU countries in preventing imports of battery
eggs (from other member countries) is one factor mitigating against a ban in these
countries, as it is in individual jurisdictions within Australia’s Federal system.)
There has been an active campaign in the ACT against battery eggs for some years.
And it is evident that some in the community feel they are adversely affected by
other people’s consumption of battery eggs. While it is not clear how widespread
this dissatisfaction is, the ACT Legislative Assembly clearly views its actions as
being consistent with the interests of the broader ACT community.
The Commission’s assessment, based on the views of experts in the area, that the
ban will provide some improvement in hen welfare is, in itself, not sufficient to
endorse its implementation. Two other issues need to be explored — whether the
proposed ban is the best way to improve hen welfare and, if so, whether, in terms of
the public benefits test required as a result of the ACT being a signatory to the
National Competition Policy package, the ban would result in net public benefits.
POLICY OPTIONS
115
Alternative measures
In terms of meeting the ACT Legislative Assembly’s objectives, a shortcoming of
most options canvassed in section 8.2 is that they don’t cause producers to switch
away from the use of battery cage systems, or do so only to a limited extent. This is
clearly the case for two of the options: improving cage systems and improving
management practices. To some extent, it is also true of the option permitting
consumer choice. On the other hand, all of these options offer the prospect of
avoiding most of the consumer and adjustment costs associated with the proposed
ban.
Another option — subsidising ACT consumption of non-battery cage eggs — has
some attractions. In some respects, it is superior to the proposed ban. For example,
it is arguably more equitable because the bulk of the costs associated with the ban
are borne by ACT taxpayers rather than by consumers of battery eggs. Being a
budgetary item, the cost of a subsidy is also more transparent than the cost
associated with a ban. However, there are some disadvantages. In particular, the
efficient level of subsidy, both at implementation and in subsequent years, may be
difficult to determine. And, under this option, administration, enforcement and
compliance costs would be significantly higher than those associated with the
proposed ban.
It is difficult to weigh up the relative merits of these policy options. However, the
Commission considers that improving information flows and permitting individuals
to choose the type of eggs they buy would be the next best alternative to the
proposed ban. This option could reduce the number of hens housed in battery cage
systems at a relatively low cost.
National Competition Policy
While the ACT Government can (as it has already done) pass the legislative
amendments relating to battery eggs, it needs to conform with two national
agreements to which it is a signatory if the legislative amendments are to be
effective in achieving their stated goals. The two inter-governmental agreements
bind jurisdictions to a national approach to mutual recognition and competition
policy.
The ACT needs to seek an exemption to the Mutual Recognition Act for the ban
because, without it, it would not be able to prevent the sale in the ACT of battery
eggs imported from other jurisdictions where it is legal to produce and sell battery
eggs (all other parts of Australia). However, before applying for the exemption, the
ACT also needs to comply with the Competition Principles Agreement, which
116
BATTERY EGGS
obliges it to subject new legislation that restricts competition (or amendments to
existing legislation) to a public benefit test.
Public benefits associated with the ban on battery eggs
The analysis summarised above suggests that the cost associated with the ban would
be equivalent to an annual sum in perpetuity in the order of $940 000. This cost
would largely be borne by ACT residents.
As noted above, the benefits stemming from improved hen welfare cannot be
reliably quantified by the Commission. This, in part, reflects the fact that the
proposed ban raises complex ethical as well as economic issues.
The benefits from improved hen welfare will accrue not only to ACT residents, but
also to other Australians who derive some satisfaction from a reduction in the
number of hens housed in battery cages. New South Wales egg suppliers could also
benefit through the creation of new market opportunities.
With the costs of the ban largely confined to the ACT, any decision made by the
ACT Government on this issue should not make the rest of Australia any worse off,
and could make it better off. The fundamental question is, therefore, whether the
benefits from banning the production and sale of eggs produced by hens housed in
battery cages is greater than an annual perpetuity of around $940 000. If the ACT
Government judges this to be the case, the Commission considers that, in terms of
the Competition Principles Agreement, the benefits associated with the restriction to
competition resulting from the legislative amendment would outweigh the costs.
In considering this issue, the Commission suggests that the ACT Government also
assess the merits of pursuing its layer hen welfare objectives by adopting the option
outlined above involving the provision of information to facilitate informed
consumer choice. The Commission cannot make a direct comparison of the net
benefits of this option and the proposed ban, mainly because it is not possible to
meaningfully assess the benefits that would result from the improvements in hen
welfare under either alternative. These are judgements that will need to be made by
the ACT Government. However, while this option would be less effective than a
ban in reducing the use of battery cage systems, it would avoid many of the costs
associated with a ban.
Public benefits associated with the labelling requirements
The cost of labelling required by the ACT legislative amendments is minor — egg
cartons already carry extensive printed information. Provided the descriptions of
POLICY OPTIONS
117
egg production systems are accurate, and the labelling requirement is properly
enforced, the additional information should benefit some consumers. However, if
the ACT Government does not apply for an exemption to the MRA, eggs from
interstate suppliers will not have to conform with the labelling requirement. If the
major ACT producer — Parkwood — closes in response to the ban, this raises the
possibility that virtually no eggs subsequently sold in the ACT would need to
comply. Notwithstanding this possibility, the Commission considers that the
benefits of the legislative amendments relating to labelling (especially in the six
year transitional period) outweigh the costs.
To make the labelling requirements more effective, the Commission considers that
the ACT Government should seek an exemption to the Mutual Recognition Act.
Implications for other animal welfare concerns
This assessment relates specifically to the welfare of layer hens and to the particular
circumstances of the ACT regional economy (eg the present sourcing of eggs to
meet local demand is one relevant factor). As a result, the findings do not provide a
basis for inferring what might be the outcome of a public benefit test of a similar
ban proposed by another jurisdiction, or of a public benefit test that assesses the
effects of a ban on any other intensive livestock activity. Similar considerations
apply to the ACT egg labelling requirement.
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A
Ministerial correspondence
This appendix comprises:
•
a letter from the Treasurer to the Chairman of the Productivity Commission
agreeing to the ACT Government’s request that the Commission undertake the
study;
•
a copy of the letter to the Treasurer from the ACT Chief Minister requesting the
study be undertaken; and
•
the terms of reference for the study developed by the ACT Government.
MINISTERIAL
CORRESPONDENCE
119
TREASURER
PARLIAMENT HOUSE
CANBERRA ACT 2600
29 July 1998
Mr Gary Banks
Chairman
Productivity Commission
PO Box 80
BELCONNEN ACT 2616
Dear Mr Banks
I have received a request (copy attached) from the Chief Minister of the Australian
Capital Territory for the Productivity Commission to undertake Public Benefit Tests
on changes to the permanent exemptions listed in the Commonwealth’s Mutual
Recognition Act 1992 and associated labelling provisions in the ACT’s Food
(Amendment) Act 1997. A guiding principle of the Competition Principles
Agreement is that legislation which restricts competition should be subject to a
Public Benefit Test.
I have agreed to the Chief Minister’s proposal and request that the Commission
complete its report within ten weeks. I have asked the Chief Minister to release the
report soon thereafter. I note the Chief Minister’s agreement for the Commission to
be reimbursed for out-of-pocket expenses.
I have copied this letter to the Chief Minister.
Yours sincerely
PETER COSTELLO
120
BATTERY EGGS
Chief Minister
Treasurer
Member for Molonglo
Australian Capital Territory
The Hon Peter Costello MP
Treasurer
Parliament House
CANBERRA ACT 2600
Dear Treasurer
I am writing to seek your agreement to the Productivity Commission undertaking
Public Benefit Tests on changes to the permanent exemptions listed in the
Commonwealth’s Mutual Recognition Act 1992 and associated labelling provisions
in the ACT’s Food (Amendment) Act 1997.
The need to undertake these tests has emerged as a result of the passage in the
Legislative Assembly on 19 September 1997 of the Animal Welfare (Amendment)
Act 1997 and the Food (Amendment) Act 1997. The combined effect of this
legislation when implemented will be to prohibit in the ACT the sale and production
of eggs using battery cage systems.
To give egg producers time to adjust to these changes, the prohibition on the use of
battery cage systems will only come into force six years after the date on which
Section 24A (1) of the Food (Amendment) Act 1997 is added to the permanent
exemptions listed at Schedule 2 of the Commonwealth’s Mutual Recognition Act
1992.
As you are aware, it is a requirement of the Competition Principles Agreement that
any new legislation or amendments to existing legislation that restrict competition
be subject to a Public Benefit Test. One of the effects of the legislation would be to
restrict competition — egg sales in the ACT would be restricted to those local and
interstate producers who do not use battery cage systems for egg production.
In addition to the mutual recognition issues, Section 24B of the Food (Amendment)
Act 1997 also requires that all egg cartons displayed or sold in the ACT be labelled
with the conditions under which the hens produced the eggs. In order to implement
the labelling provision, a regulation will have to be made that allows for the
prescribing of expressions, and prescribing expressions to be used on egg cartons.
This regulation will also have to be reviewed against the requirements of the
Competition Principles Agreement.
MINISTERIAL
CORRESPONDENCE
121
The major reason for seeking the Productivity Commission’s involvement is the
potential national significance. This has two dimensions. First, that the regulatory
issues concerning eggs produced by battery hens that have been raised in the ACT
could well be an issue for other jurisdictions. More importantly, the issues could be
relevant to other significant Australian activities (eg certain pig and cattle raising
businesses). Consequently, the issues could well have important national
implications. It would therefore be appropriate for the Commission to undertake the
requested Public Benefits Tests on behalf of the ACT Government.
Finally, as this will be a relatively short, low cost exercise the ACT Government
will meet any ‘out-of-pocket’ expenses incurred by the Commission.
I look forward to receiving your reply on this matter.
Yours sincerely
Kate Carnell MLA
Chief Minister
11 MAY 1998
122
BATTERY EGGS
Terms of Reference
The ACT Government has requested the Productivity Commission to carry out two
Public Benefit Tests — one on the proposed amendment to the Commonwealth’s
Mutual Recognition Act 1992 and a second one on the labelling requirements of the
ACT Food (Amendment) Act 1997. In order to provide an objective framework for
the Public Benefit Tests, the following Terms of Reference have been developed for
both amendments so that costs and benefits to the community of the amendments
can be assessed.
1. In undertaking the Public Benefit Tests on behalf of the ACT Government the
Productivity Commission will take into account clause 5(1) of the Competition
Principles Agreement (CPA). The guiding principle of clause 5(1) is that
legislation (including Acts, enactments, Ordinances or regulations) should not
restrict competition unless it can be demonstrated that:
(a) the benefits of the restriction to the community as a whole outweigh the
costs; and
(b) the objectives of the legislation can only be achieved by restricting
competition.
All aspects of the current regulatory regime will be considered in the context of
their impact on the community, the industry and the economy. Subclause 1(3) of
the CPA provides guidance on matters that may be taken into account when
determining the public benefit of particular objectives:
“Without limiting the matters that may be taken into account, where this
Agreement calls:
(a) for the benefits of a particular policy or course of action to be balanced
against the costs of the policy or course of action; or
(b) for the merits or appropriateness of a particular policy or course of action to
be determined; or
(c) for an assessment of the most effective means of achieving a policy
objective;
MINISTERIAL
CORRESPONDENCE
123
the following matters shall, where relevant, be taken into account:
(d) government legislation and policies relating to ecologically sustainable
development;
(e) social welfare and equity considerations, including community service
obligations;
(f) government legislation and policies relating to matters such as occupational
health and industrial relations and access and equity;
(g) economic and regional development, including employment and investment
growth;
(h) the interests of consumers generally or a class of consumers;
(I) the competitiveness of Australian businesses; and
(j) the efficient allocation of resources.”
2. Without limiting the above factors the Productivity Commission shall take into
account:
(a) the economic benefits and costs of different egg production systems;
(b) the social benefits and costs of different egg production systems; and
(c) the environmental benefits and costs of different egg production systems.
3. In taking into account these benefits and costs, and in recognition of the
Australia-wide implications of amendments to the Mutual Recognition Act
1992, the Productivity Commission shall not be limited to benefits and costs
arising within the ACT only.
In weighing up the costs and benefits the Productivity Commission will take
into account the fact that the legislation would not come into effect until six
years after the Commonwealth’s Mutual Recognition Act 1992 has been
amended. The weighing up of costs and benefits will be undertaken on both
qualitative and quantitative grounds.
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BATTERY EGGS
B
Public participation
Shortly after receiving the Treasurer’s request to undertake the study, an
advertisement was placed in the Canberra Times inviting interested parties to
register their interest with the Commission. Those organisations and individuals that
contacted the Commission in response to the advertisement, along with other parties
identified by the Commission as likely to have an interest in the inquiry (eg egg
suppliers to the ACT market, animal welfare groups, government organisations and
researchers), were forwarded a circular inviting them to prepare a written
submission to the study by 9 September 1998.
On 15 September 1998, copies of major submissions (excluding confidential
material) were distributed to all organisations that had prepared submissions for the
study, along with an invitation to comment on both factual matters and the views
expressed in those submissions.
In total, 104 submissions (including responses to other parties’ submissions) were
received. Of these, around 70 were letters from individuals expressing support for
the ACT legislative amendments. The submissions received are listed in table B.1.
The Commission also held informal discussions with organisations and individuals
to help understand the major issues. Some of those discussions involved inspections
of the three major egg production systems used in Australia. Some discussions used
teleconference facilities. Those organisations and individuals with whom
discussions were held are listed in table B.2.
Research team
This report was researched and written by Ralph Lattimore, Alan Madge and
Garth Pitkethly. Geraldine Martisius provided administrative support.
PUBLIC
PARTICIPATION
125
Table B.1
Submissions received
Participant
Submission Number(s)
ACT Government
74
Action Magazine
52
Alexander, Maria
60
Animal Liberation (ACT)
33
Animal Liberation (NSW)
50
Animal Liberation (QLD)
81
Animal Liberation (SA)
54
Animal Liberation (VIC)
85
Animal Rights Advocates
53
Animal Rights Education
98
Animals Australia
Australian Catholic Study Circle for Animal Welfare
Australian Egg Industry Association
83/97
87
76/102
Ball, G T
56
Ball, Iris
55
Bartter Enterprises
30/100
Brown, Juliet
58
Caldon, James
36
Carroll, Desmond D
92
Clissold, Matthew
82
Compassion in World Farming
42
Conservation Council of the South-East Region & Canberra
62
Cook, Betty
8
Cowley, Judith
77
Cresswell, Ian
24
Curtin, John F
63
Davey, Cheryl
64
Department of Treasury & Finance (TAS)
7
Dept of Primary Industry & Fisheries (NT)
9
Downing, E
2
Elwis, Terry
14
Estelle, Naomi
61
Fairleigh, Jean
11
Graham, Phyllis
21
Greig, B
10
Gundry, Nerida E
66
Hamston, Susan
41
Hawke, Iris
19
126
BATTERY EGGS
Participant
Submission Number(s)
Herlihy, Astrid
45
Horkan, B E
80
Horne, Barry & Elaine
90
Humane Society International
51
Humane Society of WA
48
Hunter Animal Watch
35
Indecipherable name
67
Indecipherable name
75
Jedryk, John & Suzanne
Jones, Ann
28
6
Jordan, Bill
15/93
Kirby, Robyn
104
Kouwenberg, Saskia
17
Langford, Mervyn
89
Lewin, Jenny & Terry
69
Lowery, Kirsten
47
Ludbrook, B
25
Lynga, Gosta & Pauline
26
Martin, Gertrude
95
Martin, Heather
37
Martin, J
70
Mason, Joan
29
Mayne, Peggy
31
McEwen, Paulene
65
Meischke, H R C
103
Mendel, Pam
88
Montague, Lilian
22
Montague, Ronald H
20
Moore, Peta
3
Moulla, J
68
Myers, Anneke
49
National Registration Authority for Agricultural & Veterinary
Chemicals
Natural Resources & Environment
34
73
NSW Farmers’ Association
78/99
Ogilvie, David
18
Orr, Kriotic; Bradley, A; Lobsey, Megan; Griffiths, A; and others
39
Parkes, Olga
44
Pearce, Rosemary
91
Plier-Malone, J
96
PUBLIC
PARTICIPATION
127
Pope, Tony
Participant
32
Submission Number(s)
Radord, Marian
43
Redman, J C
27
Rees, A
84
RSPCA Australia
46
Sanders, Dick
16
Sandoz, Jean
86
Seggie, Joan
40
Selmes, Carmel
79
Selmes, Christine
94
Shannon, Marcia
59
Smith, Eleanor
13
Soloman, Maree
71
Sony Art Dept – McIntyre, Erica
38
Starling, D I
4
Terry, Ed
23
Tucker MLA, Kerrie
57
von Bertouch, Anne
5
Walsh, Lucy
12
White, Kevin
1
Wilks, Ann Verona
Williams, Rhian
128
BATTERY EGGS
72
101
Table B.2
Visits and discussions
Name
Professor David Adams
Organisation
Mr Peter Barber
Principal Research Scientist, Bureau of Resource
Sciences
State Director, RSPCA Victoria
Dr John Barnett
Victorian Institute of Animal Science
Mr Bruce Bevan
Executive Director, Australian Supermarket Institute
Limited
Country Eggs
Ms Jac Grangien
Mr Geoff Keogh
Mr Ian Livingstone
Mr Beat Loeliger
Mr Gordon McCallister
Mr Hugh McMaster
Mr David Mitchell
ACT Chief Minister’s Department
Pace Farms
Counsellor, Embassy of Switzerland
Office of Ms Kerrie Tucker MLA
Executive Director, Australian Egg Industry Association
Dr Liam Morrisroe
Assistant Director, Animal Welfare Section, Commonwealth
Department of Primary Industries and Energy
Geneticist and Veterinary Manager, Bartter Enterprises
Ms Glenys Oogjes
Director, Animals Australia
Mr Frank Pace
Mr Greg Parkinson
Mr Petar Pirovic
Ms Leanne Power
Ms Frankie Seymour
Professor Peter Singer
Ms Kerrie Tucker MLA
Mr Brian Wiltshire
Dr Hugh Wirth
Mr Charles Wright
Managing Director, Pace Farms
Victorian Department of Agriculture
F Pirovic and Sons
ACT Chief Minister’s Department
President, Animal Liberation (ACT)
Animals Australia and Deputy Director, Centre for
Human Bioethics
ACT Greens
Bartter Enterprises
President, RSPCA Australia
RSPCA NSW
PUBLIC
PARTICIPATION
129
C
What other countries do
This appendix briefly outlines some of the initiatives that have been introduced in
other countries either to ameliorate the animal welfare effects of battery cage
systems or to outlaw them altogether. Most attention is paid to Switzerland, as this
is the only country to date to have effectively outlawed battery cage production. 1
The European Union
As Larkin et al (1997, p. 56) note, in Europe there is generally more concern with
hen welfare than, for example, in the US. Nevertheless, overall some 93 per cent of
Europe’s 270 million layer hens continue to be kept in cages (World Animal Net:
Battery Hens Campaign, Legislation, p. 3).
In the EU, all egg production — barn-lay, aviary and free-range, as well as battery
cage — is highly regulated. For example, general welfare regulations cover
protection of animals during transport, husbandry practices, animal care prior to
slaughter, design and construction of buildings, and feed and water supply. In
addition, there are specific provisions for battery cages, other intensive egg
production systems and for free-range production.
Concern about the welfare of battery caged hens has been an element in EU agripolitics for some time. Demand for change has taken two overlapping avenues: the
banning of battery cages per se and proposals for making battery caged production
more acceptable (eg by increasing the minimum area per bird and installing perches
and nesting boxes). A proposed new EU directive, to apply to newly built, or rebuilt
systems, from 1 January 1999, and to all systems from 1 January 2009, proposes to
increase the minimum area per hen from 450 square centimetres to 800 square
centimetres (World Animal Net: Battery Hens Campaign, Legislation, p. 6 and
Dunn 1997, p. 32).
On an individual European country basis, Larkin et al (1997, p. 56) note that hen
welfare considerations are not prominent in French advertising (suggesting a low
1 Objections to battery cages appear strongest in Europe, especially the northern member states of
the EU, and to be lowest in Asia. This may in part be income related — the impact of higher egg
prices is clearly less in higher income countries.
WHAT OTHER
COUNTRIES DO
131
level of concern), but are more prominent in the UK and Scandinavian countries.
Compassion in World Farming (sub. 42, p. 7) notes that the Netherlands Minister of
Agriculture is pressing for a EU-wide ban on the battery cage system, and that there
is evidence of concerns in Austria about the welfare implication of battery cages.
Denmark appears to have unilaterally introduced a minimum space allowance for
hens of 600 square centimetres per bird (World Animal Net: Battery Hens
Campaign, p. 8).
However, as noted by Animals Australia (sub. 97, p. 5), EU member states cannot
stop the import of battery eggs on a unilateral basis. Hence, a number of countries
— Germany, the UK, Finland and Holland — appear to have put aside their
preference to phase out battery cages until there is EU agreement. In Animals
Australia’s view, there is a clear trend in sentiment within the European community
away from battery cages, led by the EU’s northern member states.
Sweden
In 1988, Sweden passed the Animal Welfare Ordinance which banned the keeping
of layer hens in battery cages from 1 January 1999. It has also banned beak
trimming (World Animal Net: Battery Hens Campaign, Legislation, p. 8). However,
the NSW Farmers’ Association notes that the ban on caged hens has been extended
until 2004 as the criteria set for alternative systems to caged production cannot be
met. The Association considers the major reason for this is the ban on beak
trimming, which has led to alternative systems, at least for the present, having
unacceptable levels of feather pecking and cannibalism. On the other hand, Animals
Australia stated that the Swedish implementation has been postponed primarily
because:
•
the development of alternative systems is not sufficiently advanced to
accommodate the Swedish laying flock; and
•
entry into the EU makes it more difficult for Sweden to act unilaterally.
However, according to Animals Australia (sub. 97, pp. 4–5), there is a steady
movement towards non-caged alternative production systems in Sweden.
Switzerland
The Swiss Animal Protection Act, which came into force in 1981 following a
referendum in 1978, effectively outlawed battery egg production in Switzerland.
The ban was achieved by prescribing certain housing conditions for hens:
132
BATTERY EGGS
•
sheltered, darkened nest boxes;
•
perches or slatted grids for all hens; and
•
a minimum area of 800 square centimetres per bird on mesh floors (Swiss
Society for the Protection of Animals STS (SSPA) 1994, p. 3).
Swiss poultry farmers had a 10 year transition period to bring their hen housing in
line with the new regulations.
The Act also established centres to research, test and evaluate alternative hen
housing systems and their equipment (SSPA 1994, p. 3). According to SSPA, aviary
systems are now clearly established as the most commercially viable of these
alternatives.
How well has the Swiss change worked? Comment on the Swiss Aviary system,
perhaps not surprisingly, tends to reflect the perspective of the reviewer. Animal
welfare groups find much to recommend in the Swiss change, while producer
groups find much to criticise.
The Working Group on the Welfare Aspects of Layer Hen Housing (1994, p. 133)
quotes Morgenstern and Lobsiger (1993) to the effect that following the change:
•
compared to caged systems, there was a return to non-specialised management,
and an increase in disease, reflected in increased mortality of 0.2 per cent per
month;
•
farm sizes fell and the industry became more fragmented, making it more
difficult to organise disease control and treatment on a large scale;
•
about 50 per cent of poultry products were imported; and
•
Swiss egg production costs rose to about three times the price of imported
(battery cage) eggs.
In a similar vein, the submission from Bartter Enterprises notes:
Cages have been banned in Switzerland. This has resulted in 70 per cent of all eggs
eaten in Switzerland being imported from Germany and Holland where caged egg
production is allowed. (sub. 30, p. 7.)
However, Animals Australia (sub. 97, p. 4) contends that, because of specific
legislative requirements, Switzerland has always imported around half of its shell
eggs and egg products. According to this organisation, imports of shell eggs fell in
Switzerland between 1984 and 1992 and, in 1992, Switzerland produced 65 per cent
of its shell eggs.
WHAT OTHER
COUNTRIES DO
133
Animals Australia’s comments are reinforced by the SSPA which notes that the
Swiss Order on the Egg Market and the Supply (Section 2, Laws and Regulations)
of eggs prescribes that domestic production of shell eggs shall not exceed 65 per
cent of average consumption in the last two years. Moreover, the organisation
argues that, while imports of egg products for use in pasta and large scale bakery
products have increased considerably, imports of shell eggs have fallen from 399
million units to 342 million units. In SSPA’s view, this shows that Swiss consumers
are prepared to support home production — and presumably its production system
— despite the price differential in favour of the imported product (SSPA 1994, p.4).
According to the SSPA (1994, p. 27), the massive increase in hen health problems,
feared by some to result from the ban, has not materialised. Birds are able to
perform a variety of normal behaviours (such as nesting and litter pecking),
although there have also been small increases in mortality and disease rates (SSPA
1994, pp. 28–31).
•
134
BATTERY EGGS
D
Costs to consumers
D.1
Framework
As noted in chapter 5, the long run supply curve for eggs can be assumed to be close
to flat.1 In this case, the impact of the ban is to shift the supply schedule (S) up, so
that the costs of production (for any desired quantity) are higher. The economic
costs of the ban — borne fully by consumers in the long run — are largely
described by the two areas A and B under the demand curve in figure D.1. A
represents the cost premium that former battery egg consumers bear at the new
purchase quantities after the ban. B represents the loss to consumers arising from
forgone consumption of eggs. Since consumers must pay more for future egg
consumption from the date of the ban, it is important to capture the dynamic effects
of the ban — including population growth, changing patterns of egg consumption
and shifts in technology. This appendix describes the detailed methodology for
estimating the values of A and B over time, as well as some other possible sources
of costs for intermediate consumers.
The analysis is in 1998–99 current prices, so that inflation can be ignored. Freerange eggs are also largely ignored because it is likely that barn-lay, rather than
free-range eggs, will replace battery cage eggs.2
A critical aspect to measuring the economic costs is the extent of the upward shift in
the supply schedule. S0 is the supply schedule under the counterfactual of no ban,
while S1 is the supply schedule if the ban proceeds. Next, the characteristics of these
supply schedules are considered.
1 For a models in a similar spirit see Wilcox (1989), Sandiford (1985) and Hafi et al (1994).
2 The outcomes are also modelled as if the only policy change is a ban on battery eggs, and ignoring
the proposed interim change to egg labelling. If egg labelling is successful at shifting consumption
significantly away from battery eggs, then the cost of the ban is much less than is projected here.
COSTS TO
CONSUMERS
135
D.2
Production costs
As noted in chapter 5, data on production costs were obtained for different egg
types from a number of industry and government sources. The full economic costs
of producing a dozen 59 gram battery and barn-lay eggs are about $1.25 and $1.70
respectively.3 Full economic costs include depreciation and the return on capital
required by the poultry farmers. If farmers do not at least get farm-gate prices which
cover these costs, then they will not enter the egg market, although existing
incumbents may stay temporarily given sunk capital.
Figure D.1
Costs for consumers from the bana
D
S1
pafter ban
A
pbefore ban
B
S0
D
E1
E0
a If the supply curve is less elastic (say as in Hafi et al 1994, p. 63), then there are reduced losses to
consumers, but bigger (and permanent) losses to producers. However, calculations suggest that, for
reasonable supply elasticities, the overall cost measures are similar.
If there is a ban on battery egg production in the ACT, then barn-lay production will
increase, and the appropriate measure of production costs for these eggs should
incorporate depreciation and a return to capital (since ex ante these assets could be
used in other industries and, thus, have a real opportunity cost). However, under the
3 Free-range egg production costs are around $2.15 (or about 25 per cent more expensive than barnlay), while their retail prices are around $3.85 (or about 4 per cent more expensive). Because of
these cost and price relativities, it seems reasonable to suppose most production and demand for
battery eggs will be directed to barn-lay rather than free-range eggs if the ban is implemented.
136
BATTERY EGGS
counterfactual of no ban, there would be very little entry into battery cage
production because of current excess supply. This implies that the appropriate
measure of resource costs for battery egg production should exclude sunk costs,
such as physical capital already allocated to battery cage production. At the
moment, farm-gate prices for these eggs are about $1.10 to $1.15, and this should
provide a better measure of the short run battery egg production costs than $1.25. If
no account is taken of these short run supply features of egg production, there
would be a risk of underestimating the costs of the ban. Over time, new investments
would need to be made in battery egg production (under the counterfactual) and, all
other things being equal, the resource costs would rise to $1.25.
Over time, there are other influences on costs which need to be accounted for. All
egg production modes are likely to benefit from further cost reductions, with new
hen breeds, feedstock, better disease controls and learning. In battery cages, the
returns to new technology and learning are likely to be smaller than in alternatives,
such as barn-lay (given the vintage of the technology). In contrast, there appears to
be scope for more significant long run reductions in barn-lay production costs, given
the novelty of this mode of production in Australia, and the fact that the type of
barn-lay system put in place after the ban might not conform with the current
RSPCA-approved barn system (for example, stocking rates could be higher). As
observed in chapter 5, in Europe, the production costs of barns, aviaries and
percheries are closer to the cost of battery cage production than is the case currently
in Australia.
Accordingly, it is assumed that, over the long run, there are two sources of costreductions. One shifts all costs down (by 10 per cent in the long run), the other
shifts down the cost of barn-lay relative to battery cages (to a final margin of 15 per
cent).
These, with other aspects of production, are characterised as follows:
CBC,0 = $1.15 (the short run production costs for battery cages at time 0 — which is
1998–99).
CBCNE,0 = $1.25 (the production costs for battery cages of a new entrant at time 0).
CBL,0 = $1.70 (production costs for barn-lay eggs at time 0).
ρ = 0.1 (the rate of long run cost diminution across all production modes).
ζt = 1/([1/φ1]+[1/θ1-1/φ1]*0.98t) which is a logistic function describing how cost
reductions for all production modes are achieved over time, with the long run
described by φ1 = (1- ρ) and the short-run by θ1 = 1.0.
COSTS TO
CONSUMERS
137
CBCLR,t = ζt * CBCNE,0 is the long run production cost for battery eggs, which reduces
over time as technology improves.
CBC,t = 1/([1/CBCLR,t]+[1/CBC,0-1/ CBCLR,t]*0.9t) which represents the resource costs
for production of battery eggs over time (starting at the short run, CBC,0, and
approaching CBCLR,t in the long run).
GAPBL,t = 1/([1/φ2]+[1/θ2-1/φ2]*0.96t) which is a logistic function describing how
the cost gap between barn-lay and battery cage production moves over time, with
the long run described by φ2 = 0.15 (ie a 15 per cent long run cost difference) and
the short-run by θ2 = CBL,0/CBC,0 - 1.
CBL,t = (1+ GAPBL,t) * CBC,t which represents the resource costs for production of
barn-lay eggs over time.
Figure D.2 shows the projected path of the two critical variables, farm production
costs per carton (with zero inflation) for the two modes (ie CBC,t and CBL,t) over a 15
year period.
Figure D.2
Projected farm production costs, barn-lay and battery cages
$ per carton
$ Economic production costs
1.700
1.600
barn-lay
1.500
1.400
1.300
battery cage
Data source: Commission calculations.
138
BATTERY EGGS
2012-2013
2010-2011
2008-2009
2006-2007
2004-2005
2002-2003
2000-2001
1.100
1998-1999
1.200
D.3
Retail prices
Production cost differences between the different systems are the key to costs borne
by consumers, but information about retail prices is needed in order to calculate
how demand may shift, and how different types of consumers lose and gain.
As noted in chapter 6, it is assumed that the absolute retail margin currently
applying to battery eggs is an appropriate measure of the margin that would exist on
barn-lay eggs in the ACT were they to become the dominant source of eggs.4 Retail
prices are calculated by adding the appropriate margin to the production costs. The
‘retail’ margin includes margins applied by both wholesalers and retailers.
Accordingly, retail prices are defined as follows:
RBC,0 = $2.88 for a 700 grams carton of battery cage eggs for 1998–99.
RBL,0 = $3.69 for a 700 grams carton of barn-lay eggs for 1998–99.
BANt = 1 if t >7, and otherwise t = 0 (ie this variable equals zero prior to the ban,
and 1 after).
RBCNB,t = CBC,t + RBC,0 - CBC,0 which is the projected retail price of battery cage eggs
if there is no ban.
RBLNB,t = CBL,t + RBL,0 - CBL,0 which is the projected retail price of barn-lay eggs if
there is no ban.
RBL,t = CBL,t + BANt λ(RBC,0 - CBC,0)+ (1-BANt)*(RBL,0 - CBL,0) which is the
projected retail price of barn-lay eggs if the ban comes into place. λ represents a
scaling variable which takes account of the extent to which barn-lay eggs sold in
higher volumes benefit from the same margin as currently applying to battery eggs.
If λ = 1 (the preferred estimate), then barn-lay eggs obtain the same absolute
margin.
D.4
Market shares
Market shares of the various egg types are unlikely to remain fixed over time. The
ACT egg market has two relevant dimensions for this analysis:
4 Sandiford (1985, pp. 110–111) finds strong econometric evidence that egg price margins can be
characterised this way in the UK.
COSTS TO
CONSUMERS
139
•
the type of use. This includes: direct consumption by households; consumption
in cafes and restaurants of food incorporating eggs (for example, omelettes); and
consumption of other products incorporating eggs (for example, confectionary,
shampoo and baked goods). It is assumed that direct household consumption will
decline somewhat, while indirect consumption will slightly increase.
•
the type of egg (free-range, battery cage or barn-lay). As people’s income rises,
they tend to place higher value on perceived animal welfare, and that, with
projected cost decreases, is likely to continue the present market trend towards
higher consumption of alternatives to battery eggs — even if no ban proceeds.
By use
The analysis starts by defining how the market share for eggs by use evolves over
time. As is customary in models of consumer goods, the long run market shares are
assumed to be asymptotic to a saturation point.
MKTSHH,t = 1/([1/φ3]+[1/θ3-1/φ3]*0.98t) is the share of ACT eggs consumed
directly by households (in the absence of a ban), with the long run described by φ3 =
0.75 (ie a 75 per cent market share) and the short-run by θ3 = 0.80 (see chapter 6).
The remaining market segment is split between catering and other products:
SHC,t = 1/([1/φ4]+[1/θ4-1/φ4]*0.98t) is the share of ACT eggs consumed indirectly by
households from cafes and restaurants (in the absence of a ban), with the long run
described by φ4 = 0.14/(1 - φ 3) (ie a 14 per cent share of the whole ACT egg market)
and the short-run by θ4 = 0.11/(1 - θ3) (implying an 11 per cent share of the whole
market — see chapter 6).
SHI,t = 1- SHC,t where SHI,t is the share of industry in the indirect eggs market.
The shares of the whole ACT egg market for these uses are defined as:
MKTSHC,t = SHC,t (1 - MKTSHH,t)
MKTSHI,t = SHI,t (1 - MKTSHH,t)
where MKTSHC,t and MKTSHI,t are the shares of catering and other industry
respectively in the entire ACT eggs market.
140
BATTERY EGGS
By type of egg consumed directly by households
The next step involves calculating the share of the ACT direct household market
accounted for by free-range eggs versus other types of eggs:
SHFR,t = 1/([1/φ5]+[1/θ5-1/φ5]*0.98t) is the ACT retail market share of free-range
eggs (in the absence of a ban), with the long run described by φ5 = 0.15 (ie a 15 per
cent market share) and the short-run by θ5 = 0.095 (The NSW Farmers’ Association,
sub. 78).
The remaining market (1- SHFR,t) is split between battery cage eggs and barn-lay.
PTBC,t = 1/([1/φ6]+[1/θ6-1/φ6]*0.98t) is the share of battery cage eggs in this market
segment (in the absence of a ban), with φ6 = 0.65/(1-φ5) (implying a 65 per cent
share of the ACT direct household egg market) and the short-run by θ6 = 0.862/(1θ5) (The NSW Farmers’ Association, sub. 78).
Clearly, the market share of this segment of demand held by barn-lay is PTBL,t =1 PTBC,t. This in turn implies that the shares of the whole ACT egg market for these
types of eggs are:
MKTSHFR,t = SHFR,t * MKTSHH,t
MKTSHBC,t = PTBC,t * (1 - SHFR,t) MKTSHH,t
MKTSHBL,t = (1 - PTBC,t) * (1 - SHFR,t) MKTSHH,t
where MKTSHFR,t, MKTSHBC,t and MKTSHBL,t are the respective shares of freerange, battery cage and barn-lay eggs consumed directly by households in the entire
ACT eggs market.
D.5
Egg consumption in the ACT
Using data on Australian per capita egg consumption and other information, it is
possible to calculate an estimated series of data describing egg consumption per
capita for ACT residents from the 1980s to the 1990s. This shows egg demand to be
falling. It is assumed that, while total egg demand would fall somewhat more over
time, it would level out at 120 eggs per capita, from 131 eggs per capita in 1998–99.
EGGt = 1/([1/φ7]+[1/θ7-1/φ7]*0.9197t) is an estimated logistic function describing
per capita ACT egg demand (in the absence of a ban), with the long run described
by φ7 = 120 and the short-run by θ7 = 131.
COSTS TO
CONSUMERS
141
In order to estimate total egg consumption (EGGDEMAND) in the absence of a
ban, EGG is multiplied by the projected ACT population (POPt) times (1 - 0.04) to
remove backyard production. The population data are from the ABS (Cat. No.
3222.0) for 1998–99 to 2050–51, with the assumption that the population continues
to grow by 0.12 per cent per annum afterwards. 5
It is then possible to estimate egg demand (in millions of dozen) for the relevant
categories of eggs consumed directly (or indirectly) by households by multiplying
the total egg demand by the respective market shares:
EGGBC,t = MKTSHBC,t * EGGDEMANDt /(1,000,000 * 12) which is demand for
battery cage eggs in the absence of a ban.
EGGBL,t = MKTSHBL,t * EGGDEMANDt /(1,000,000 * 12) which is demand for
barn-lay eggs in the absence of a ban.
EGGC,t = MKTSHC,t * EGGDEMANDt /(1,000,000 * 12) which is demand for
battery eggs for use in cafes and restaurants in the absence of a ban. It is presumed
that, after a ban, the demand for such eggs is met by barn-lay eggs. The analysis
also assumes that there is effectively no change in the demand for eggs by cafes and
restaurants after a ban, because the percentage price change of the final goods
incorporating eggs will be very small.
EGGNEWBL,t = BANt * EGGBC,t * (1+ε. [RBL,t/RBCNB,t -1]) which is the level of new
demand for barn-lay eggs by former household consumers of battery eggs. ε is the
price elasticity of demand for eggs, measured as -0.2.
D.6
Costs to consumers — direct consumption of eggs
New, ‘forced’, consumers of barn-lay eggs lose because they have to pay more for
their eggs, as well as forgoing some egg consumption altogether:
COSTBC,t = BANt * EGGNEWBL,t * (RBL,t - RBCNB,t) + (EGGBC,t - EGGNEWBL,t)* (RBL,t
- RBCNB,t)/2
However, the costs to existing consumers of barn-lay eggs will be negative after the
ban if retail margins are squeezed (through volume and/or competition):
COSTEXIST,t = BANt * EGGBL,t *( RBL,t - RBLNB,t)
5 Consistent with trend growth rates over the last twenty years of the ABS projections.
142
BATTERY EGGS
D.7
Costs to consumers — indirect consumption of
eggs
Householders also consume eggs as part of other products. The analysis ignores
those products where the supplier is able to use pulped or powdered egg (most
industrial applications and bakeries), but considers restaurants and cafes, where
shell eggs may be more routinely used.
In this case, the cost arising from the ban for indirect consumption of eggs is:
COSTC,t = BANt . EGGC,t* (CBL,t - CBC,t)
D.8
Retailers’ and wholesalers’ margins
Some of the apparent impacts of the ban on final consumers may reflect transfers
from intermediate consumers — retailers and wholesalers. The costs to consumers
(COSTBC and COSTEXIST) include any changes in retail margins brought about as a
result of the ban. If changes in margins reflect the costs of retailing and wholesaling
(such as grading, packaging, transport, holding, advertising and other costs,
including a normal return on capital), then it is appropriate to count these as
economic costs. However, if some of the changes in the margins represent changes
in profits to retailers and wholesalers, then these are transfers, rather than economic
losses, and should be netted out in the final count of the economic impact.
The change in profits for intermediate consumers is (where the subscripts follow the
earlier conventions):
∆PROFITt = (PROFITBL,t - PROFITBC,t) EGGNEWBL,t + (PROFITBL,t PROFITBLNB,t) EGGBL,t
Each of these profits can be seen as a percentage of the gross margin between retail
prices and farm-gate prices:
PROFITBL,t = µ1λ (RBC,0 - CBC,0)
PROFITBC,t = µ2 (RBC,0 - CBC,0)
PROFITBLNB,t = µ3 (RBL,0 - CBL,0)
COSTS TO
CONSUMERS
143
where the µ terms are the shares of gross margins representing a return above the
full6 economic costs of getting unpackaged eggs to the final consumer. µ1, µ2 and µ3
are, respectively, the profit share for barn-lay eggs (after the ban), battery cage eggs
(before the ban) and barn-lay eggs (before the ban). It is then possible to derive the
change in profit as:
∆PROFITt = (λµ1− µ2) (RBC,0−CBC,0) EGGNEWBL,t + {(λµ1) (RBC,0 − CBC,0) − µ3
(RBL,0 − CBL,0)} EGGBL,t
For instance, it can be seen that if λ = 1 and µ1=µ2=µ3 , the first component of the
above expression vanishes (which would occur if the cost of retailing/wholesaling
high volumes of barn-lay eggs was close to that of battery eggs now). With λ =1,
the second component represents a loss of profits to retailers and wholesalers
(which partly offsets the gain made by existing barn-lay consumers). In the standard
set of parameters, it is assumed that λ = 1 and µ1=µ2=µ3=0.2. However, also
examined is a scenario where all margins represent economic costs (and therefore
µ1=µ2=µ3=0). If this were the case, then there is no cost to retailers and wholesalers
from the shift.7
D.9
Total costs to consumers and intermediate users
Accordingly, total costs from the ban are:
TOTCOSTt = COSTBC,t + COSTC,t + COSTEXIST,t − ∆PROFITt
The costs of the ban are projected into the future (until the discounted value of the
costs for the last year are effectively zero). The present value of these costs
(discounted to 2005–6) are:
∞
PVCOST = ∑ t = 0
TOTCOSTt
(1 + r ) t −8
where r is the discount rate, set at 0.07 and t = 0 is 1998–99.
The perpetuity (payable from 2005–6) needed to fund this liability is:
PERPET =
r
PVCOST
(1 + r )
6 Including depreciation and a normal rate of return on capital.
7 This does not mean that profits, in the business sense, are zero. Rather, the profits are just
sufficient to justify the investments made, so that economic profits are zero — or there are no
incentives for further entry by competitors.
144
BATTERY EGGS
Table D.1 shows the major components of TOTCOST for the first ten years of the
ban (in undiscounted form) for the standard set of parameters. Table D.2 indicates
how different assumptions about key parameters affect the overall estimate of the
cost of the ban (using PERPET as the preferred cost measure).
Table D.1
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014
2014-2015
Costs to consumers (standard parameter settings)
COSTEXIST
COSTBC
COSTC
∆PROFIT
TOTAL
$m
-0.048
-0.050
-0.053
-0.055
-0.057
-0.060
-0.062
-0.064
-0.066
-0.068
$m
0.803
0.770
0.741
0.715
0.691
0.670
0.650
0.632
0.616
0.601
$m
0.141
0.137
0.133
0.129
0.126
0.123
0.121
0.119
0.117
0.115
$m
-0.010
-0.010
-0.011
-0.011
-0.011
-0.012
-0.012
-0.013
-0.013
-0.014
$m
0.905
0.866
0.831
0.800
0.771
0.745
0.721
0.700
0.680
0.661
Source: Commission estimates
In summary, the Commission’s best estimate of the consumer impact of the ban is a
permanent yearly cost of about $0.65 million from 2005–06 onwards — or about
two dollars per ACT resident per year. Most of these costs (of the order of 90 per
cent) are a consequence of higher prices for eggs directly bought by households.
The estimate is robust to many small changes in the parameters. However, larger
costs — up to an extreme of $2.9 million a year — may be obtained by making no
allowance for future cost reductions or other aspects of the future. More optimistic
settings — for instance, faster technological progress in barn-lay production —
would make the annual costs smaller than $650 000 a year.
COSTS TO
CONSUMERS
145
Table D.2
No
.
Costs to consumers (under alternative assumptions)
Parameter settings
Perpetuity
1
RBC0 = 2.86
$m
1998–99
prices
0.641
2
RBL0 = 3.89
0.607
3
λ = (RBL,0 -CBL,0)/(RBC,0 - CBC,0)
1.145
4
φ1=1
0.667
5
φ2=CBL,0/CBCNE,0 – 1
1.181
6
φ3=0.9, φ4=0.65, θ3=0.9, θ4=0.65
0.674
7
φ5=0.095
0.655
8
φ6=0.952
0.726
9
φ7=131
0.690
10
µ1=0, µ2= 0, µ3 = 0
0.633
11
Settings 1 to 10
a
2.848
12
Our projection
0.648
Loss in Remarks
2005-06
$m
2005–06
prices
0.901 Base battery cage prices are slightly
lower (based on the Commission’s
survey data).
0.879 Base barn-lay prices are slightly
higher (based on the Commission’s
survey data).
1.387 Barn-lay consumers get no discount
on the retail margin after the ban.
0.912 Small extra costs to consumers
because long run costs of eggs fall
by less.
1.302 Barn-lay production costs don’t fall
over time.
0.948 The household market share is
bigger (at 90 per cent) and the
catering industry smaller.
0.909 The free-range market share does
not grow at all.
0.946 The battery cage market does not
decline in the absence of the ban.
0.942 Total egg demand per capita does
not decline at all in the absence of
the ban.
0.896 Retailers and wholesalers claw no
‘excess’ profits from existing barnlay consumers.
2.729 Simultaneous realisation of all of
the above. Note that setting 3, 5 and
10 explain most of the higher
amount.
0.905
a We also tested the implications of having much bigger battery egg demand than ABS figures suggested,
as well as ‘pessimistic’ views about prices and future cost reductions. For example, if parameter settings 1,
2, 3, 4, 5, 6 and 10 hold, as well as φ5 =θ3=0.05, φ6 =θ6=0.98 and φ7 =θ7= 152, then the perpetuity is $3.63 million
per year and the first year costs of the ban are $3.48 million. These settings are similar to those used by the
AEIA.
146
BATTERY EGGS
E
Retail prices in the ACT
The Commission obtained summary data on retail prices of different eggs from the
Australian Supermarket Institute (see chapter 6), but also independently collected
information from a wide range of retail sites throughout the ACT. The information
related to prices, carton sizes, the mode of production (free-range, battery cage or
barn-lay), whether the eggs were on ‘special’, whether battery eggs were
‘vegetarian’, ‘Omega 3’ or ‘standard’, and the nature of the retail outlet.
Altogether 218 observations were collected on egg prices in the ACT from 21 stores
(including major centre supermarkets, smaller suburban supermarkets and small
shops, such as butchers). Non-battery eggs were available from all of the major
centres and suburban supermarkets sampled.
Using regression analysis we modelled the (log of the) price per kilogram of eggs as
a function of the production mode, whether eggs were vegetarian or omega 3, the
number of eggs in the carton, whether the eggs were on special, the per egg weight
and whether the shop selling the egg was a supermarket or some other outlet. All
variables were found to be significant, and had the expected impact on egg prices
per kilogram.
We were then able to project the price of any sort of egg, depending on its
characteristics (table E.2). Notably, the price of a dozen 59 gram eggs purchased
from a supermarket (and not on special) was projected to be $2.85 for battery eggs
and $3.87 for barn-lay — a 35 per cent price difference. This is somewhat higher
premium than found by the Australian Supermarket Institute, though the difference
may reflect the fact that the Commission data are not weighted by the volume of
sales.
RETAIL PRICES IN THE
ACT
147
Table E.1
Regression model of ACT egg prices per kilogram
Variable
1
2
3
4
5
6
7
8
9
Constant
FREE
BARN
OMEGA
VEGETARIAN
log (EGG NUMBER)
SPECIAL
log (PER EGG WEIGHT)
SUPERMARKET
Coefficient
t statistic
3.767
0.304
0.309
0.260
0.344
-0.109
-0.096
-0.577
0.248
18.1
22.0
20.4
14.5
19.3
-8.4
-4.0
-11.8
6.6
a The dependent variable was the log of the egg price per kilogram. The number of observations was 214
(with 4 of the 218 original observations being excluded as outliers). The R2 was 0.86, while the F test of the
joint significance of the parameters was F(8,205) = 159.5, while the standard error of the estimate was
0.071.
Source: Commission calculations.
Table E.2
Prices for 59 gram eggs in the ACT sold in supermarkets
Type of egg
$ per kilogram
Battery (standard egg)
Battery (vegetarian)
Battery (Omega)
Free-range
Barn-lay
Index of price (standard 12 = 100)
Battery (standard egg)
Battery (vegetarian)
Battery (Omega)
Free-range
Barn-lay
Source: Commission estimates using the above model.
148
BATTERY EGGS
Carton size
12
$
4.02
5.67
5.22
5.45
5.47
Index
100.0
140.7
126.0
130.6
136.1
6
$
4.34
6.12
5.63
5.88
5.90
Index
106.5
147.2
132.5
137.1
142.6
F
The expected lifespan of hens
The expected lifespan of hens was estimated using the following set of calculations:
N = MIN(INT([1/µ]*52),[6*52]-20)
DEATHt =µ/52*POP0 for t=21 to 72 and
IF (t<N +20) and (t>72) then DEATHt = (1-µ)* POP0/(N - 52)
IF(t =N+20) then DEATHt = POPt-1
IF(t >N+20) then DEATHt = 0
POPt = POPt-1 - DEATHt
AVLIFE t =
t DEATH × L + (POP - ∑ t DEATH ) × t
∑ L=21
L
0
L=21
L
POP0
where:
N
is the number of years that a hen will live (with linear mortality rates
and a maximum life of six years);
INT
denotes the integer value of an expression;
MIN
is the minimum of two numbers;
µ
is the annual mortality rate experienced in the period from 20 to 72
weeks;
POP0
is the initial population of hens at the end of the 20th week;
POPt
is the population of hens in week t; and
DEATHt
is the number of deaths in week t.
The Commission was informed that linear mortality was a good approximation to
the actual pattern of mortality over the 20 to 72 week period, but trials with a
variety of alternative, more complex, patterns gave similar results to that above.
THE EXPECTED
LIFESPAN OF HENS
149
The value of AVLIFE at t=312 weeks (or 6 years, the maximum life of a hen in this
model) is the estimate of the expected lifespan of hens associated with a particular
mortality rate that are allowed to live to their maximum life. The value of AVLIFE
for any other value of t is the expected lifespan of a hen when all surviving hens in a
flock are slaughtered at time t. For example, AVLIFE72 is the expected life of a hen
in a flock where all hens are slaughtered at the end of the 72nd week.
150
BATTERY EGGS
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